How does Potbelly Sandwich Works use the initial franchise fee?
Potbelly_Sandwich_Works Franchise · 2025 FDDAnswer from 2025 FDD Document
nd your rights under this SDAA.
- 2.02 Development Fee. In consideration of our execution of this SDAA, you agree to pay us a development fee equal to the sum of $40,000 for your first Potbelly Shop and $20,000 times the aggregate number of additional franchised Potbelly Shops which you are required to establish and operate pursuant to this SDAA (the "Development Fee"). The Development Fee is payable in full when you sign this SDAA and will be fully earned when paid. You recognize that we have incurred administrative and other expenses in relation to this SDAA, and that our development opportunities have been lost or curtailed as a result of the territorial rights granted to you in this SDAA. Therefore, we will not refund the Development Fee in whole or in part, under any circumstance.
The Development Fee will be applied against the initial franchise fee that will be payable under the franchise agreements for each of your Potbelly Shops (each, an "Initial Franchise Fee"). Each Initial Franchise Fee will be reduced by the amount of the Development Fee you paid for that Potbelly Shop, that is, by $40,000 for your first Potbelly Shop and by $20,000 for your second and subsequent Potbelly Shops. The Initial Franchise Fee against which the Development Fee will be credited will be our then-current Initial Franchise Fee for each Potbelly Shop opened under this SDAA. You will pay the remaining balance (if any) of the Initial Franchise Fee for each Potbelly Shop to be opened pursuant to this SDAA on the date you sign the franchise agreement for the Potbelly Shop.
- 2.03 Development Rights.
Source: Item 23 — RECEIPTS (FDD pages 79–355)
What This Means (2025 FDD)
According to Potbelly Sandwich Works's 2025 Franchise Disclosure Document, the development fee paid by a franchisee will be applied against the initial franchise fee. The development fee is $40,000 for the first Potbelly Shop and $20,000 times the number of additional shops the franchisee is required to establish. This fee is payable in full when the franchisee signs the SDAA (Site Development Area Agreement) and is considered fully earned upon payment.
For the first Potbelly Sandwich Works shop, the initial franchise fee will be reduced by $40,000. For the second and subsequent shops, it will be reduced by $20,000 each. The remaining balance of the initial franchise fee, if any, must be paid on the date the franchise agreement is signed for each shop.
Potbelly Sandwich Works will not refund the development fee, either in whole or in part, under any circumstances. However, there is an exception: the unapplied portion of the development fee paid will be refunded only if the agreement is terminated pursuant to Section 8.02(j). This means that if a franchisee has paid a development fee for multiple locations but has not yet opened all of them and the agreement is terminated under the specific conditions of Section 8.02(j), the franchisee may receive a refund for the locations not yet opened.