Potbelly
Potbelly offers sandwich shops serving classic and gourmet subs, soups, salads, and desserts. Known for its customizable sandwiches, the brand operates in the quick-service restaurant sector.
About Potbelly
Potbelly Sandwich Shop, also known as Potbelly Sandwich Works, is an American fast-casual restaurant chain with over 400 locations that focuses on submarine sandwiches and milkshakes. It is owned by RaceTrac.
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Potbelly franchise FAQ
How much does it cost to open one — the total initial investment?
The total initial investment to begin operation of a Potbelly Shop franchise ranges from $694,019 to $1,314,099. This includes an initial franchise fee of $40,000 (or potentially reduced to $20,000 if eligible for certain incentive programs), additional funds needed for the first 3 months of operation, and other required expenses such as site selection and development fees [p.1].
What is the initial franchise fee?
The initial franchise fee is $40,000 for the first Potbelly Shop covered by the Franchise Agreement. For each additional Potbelly Shop, a development fee of $20,000 per shop is required on top of this initial franchise fee [p.26].
What are the ongoing royalty and advertising fees?
The ongoing royalty fee is 6% of weekly Total Revenue. Additionally, there is a Potbelly Brand Fund contribution based on sales, which is recorded as revenue when earned. The Brand Fund also covers marketing and advertising expenses, with expenditures primarily allocated to media placement, production, general and administrative costs, marketing technology platforms, and other miscellaneous items. [p.40, p.23]
How long is the initial franchise agreement, and can I renew it?
This isn't specified in the excerpts.
Can I sell or transfer my franchise, and what does that require?
Yes, you can sell or transfer your franchise, but it requires approval from the franchisor. The process involves paying a transfer fee, which is fifty percent (50%) of the current initial franchise fee if the transferee is not an existing Potbelly Shop franchisee, or twenty percent (20%) if they are. Additionally, the new owner must sign the then-current forms of franchise agreement and related documents, including the Guaranty and Assumption of Obligations [p.127]. This isn't specified in the excerpts for non-controlling ownership interests, but a fee of $500 is required for such transfers [p.126].
On what grounds can the franchisor terminate the agreement?
The franchisor may terminate the franchise agreement on any grounds available by law [p.258]. Additionally, the franchisor can terminate the agreement if there is a failure by the franchisee to comply with lawful provisions of the franchise agreement and such failure is not cured within a reasonable time, which cannot exceed 30 days [p.5].
What financial requirements — net worth and liquid capital — do I need to qualify?
According to the FDD, you must have a sufficient net worth to invest in the Potbelly Shop franchise opportunity [p.91]. Additionally, you need to demonstrate sufficient funds to meet all obligations under the agreement [p.91], and you may be required to provide financial statements and other information to show your financial capabilities [p.172]. This isn't specified in the excerpts regarding exact liquid capital requirements.
Do I get an exclusive or protected territory?
No, you do not receive an exclusive territory. You may face competition from other franchisees, outlets owned by the company, and other competitive brands [p.49]. Additionally, the franchisor retains extensive rights to operate Potbelly Shops in any location without restriction [p.50].
What training and ongoing support does the franchisor provide?
The franchisor provides an initial 6-week in-store training program and a 4-day owner training course at a designated Potbelly Shop in Chicago. Ongoing, the franchisee must ensure that at least one representative attends up to eight days of supplemental training annually, and all attendees must pass applicable tests. Additionally, the franchisee is required to send representatives to an annual convention for up to three days. [p.103]
How many franchised outlets are there, and how many have closed or been terminated?
As of the end of Period 12 in 2024, there were 96 franchised Potbelly Shops open. During this period, two franchised Potbelly Shops closed, and some franchise agreements were terminated or not renewed [p.67].
Does the franchisor share any financial performance or earnings information?
The franchisor may provide financial performance information, but only if there is a reasonable basis for it and it is included in the disclosure document [p.66]. The franchisor does not make any financial performance representations except as specified in Item 19 of the FDD, and no one authorized by the franchisor can make such representations either orally or in writing [p.70], [p.243].
What am I restricted to selling, and where must I buy supplies?
You are generally required to operate according to System Standards, which include using specific vendors for certain key products critical to your menu and brand. For other products, you may purchase from any source that meets the minimum standards and specifications set by the franchisor [p.28]. You must also ensure that all items meet the quality standards as determined by the franchisor [p.29]. As for supplies, if you want to buy any product brand, ingredient, supply, or service not yet approved by the franchisor, you need to notify them and submit samples for approval [p.31]. This isn't specified in the excerpts.