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Franchise Costs: Detailed Estimates of Potbelly Sandwich Works Franchise Costs (2017 FDD)

by Franchise Chatter on September 16, 2013

in Franchise Costs, Sandwich Franchise

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Potbelly Sandwich Shop Photo by kbmaloney

This post was updated on August 13, 2017 to reflect information from Potbelly Sandwich Works’ 2017 FDD (Item 7).

Detailed Estimates of Potbelly Sandwich Works Franchise Costs Based on Item 7 (Estimated Initial Investment) of Potbelly’s 2017 Franchise Disclosure Document

For Non-Drive Thru Location

1.  Initial Franchise Fee:  $40,000

2.  Real Estate/Rent:  not specified

  • A standard non-drive thru Potbelly Shop occupies approximately 2,000 to 2,400 square feet of leased space in a strip shopping center, enclosed shopping mall, lifestyle center, or similar location.
  • The preferred trade area is a metropolitan market with a large working population or a densely-populated suburb. The site should be close to daytime traffic drivers (for example, dense urban office neighborhoods, suburban office parks or corporate campuses, and large entertainment, hospital, or transportation complexes).
  • Rent depends on geographic location, size, local rental rates, businesses in the area, site profile, and other factors and could be considerably higher in large metropolitan areas.

3.  Security Deposit:  not specified

  • The franchisor anticipates that you will rent your Shop’s site. Your landlord will likely require you to pay a security deposit equal to one month’s rent or more.
  • You currently must use the franchisor’s approved, unaffiliated vendor of site selection location services (during the site selection process) and pay that vendor directly for its services. Your fee for this vendor will range from $2,000 to $3,000 depending on how many Shops you have in the particular market area.

4.  Construction/Leasehold Improvements:  $240,000 to $350,000

  • You will improve a 2,000 to 2,400 square foot property, with a range of improvement costs between $100 and $146 per square foot. These numbers include the costs of general contractors and licensed tradesmen to install electrical and plumbing and do not take into account any landlord contribution.
  • The amounts could differ if your Shop’s construction design exceeds the franchisor’s criteria or if the costs of construction materials and labor used in a particular geographic region differ from the estimated cost range, especially if in a large metropolitan area.
  • The franchisor assumes that leased premises already will have the following pre-build-out attributes:  permanent and/or non-support walls; base concrete floor; exposed ceiling; utilities; and HVAC system.
  • Your investment could be substantially higher if you decide to lease space in an enclosed mall or similar high-rent facility.
  • Financing the lease improvement costs also involves associated debt-service costs and fees, which may increase the amount you must pay.
  • Leasehold improvement costs — including floor covering, wall treatment, counters, ceilings, painting, window coverings, electrical, carpentry and similar work, and contractor’s fees — depend on the site’s condition, location, and size; the demand for the site among prospective lessees; local rental rates; businesses in the area; the site’s previous use; the build-out required to conform the site for your Shop; geographic location; any construction or other allowances the landlord grants; and other factors.
  • If you receive landlord allowances, the landlord might factor those amounts into your rent.
  • A larger space likely will cost more than the average above. If a drive-thru is the preferred format for a given trade area/site, build-out costs are likely to exceed the high end of the range.

5.  Architect Fee (for your architect):  $22,000 to $28,000

6.  Furniture, Fixtures, and Signage:  $65,000 to $95,000

7.  Equipment (including smallwares):  $96,000 to $114,000

  • This includes signage, refrigerators, freezers, conveyor ovens, preparation tables, customer tables, chairs, booths, and other items listed in the Operations Manual or equipment and smallwares listing.

8.  Point-of-Sale and Computer Systems:  $25,000 to $28,000

  • This estimate includes initial Payment Card Industry (PCI) Data Security Standard compliance costs.

9.  Opening Inventory:  $11,000 to $16,000

10.  Marketing Introduction Program:  $1,000 to $7,000

  • This is the amount you must spend (depending on your market) for an initial marketing and advertising program beginning before and continuing 6 months after your Shop opens. The franchisor will help you develop the market introduction program.

11.  Insurance (12 months):  $10,000 to $15,000

  • You must obtain and maintain certain types and amounts of insurance coverage. Insurance costs depend on policy limits, types of policies, nature and value of physical assets, gross sales, number of employees, square footage, location, business contents, and other factors affecting risk exposure. The estimate contemplates insurance costs for 12 months.

12.  Training Expenses:  $40,000 to $45,000

  • This estimates the cost for your Managing Owner (or Operations Partner, as applicable), Lead Manager, and Shop key-holding supervisory employees to attend the initial franchise training program. Although the franchisor does not charge tuition, you must pay all attendance costs, which depend on how many people attend training, their point of origin, method of travel, class of accommodations, and living expenses (food, transportation, etc.).

13.  Professional Fees:  $2,000 to $5,000

  • This estimates the costs of professional advisors (like an attorney and accountant) for the initial review and advice consistent with the start-up of a franchised business.
  • The franchisor strongly recommends that you seek professional assistance when evaluating the franchise opportunity and franchise documents. Your professional advisors also should review any lease or other contracts you sign for your Shop.

14.  Business Licenses and Permits:  $250 to $1,700

15.  Office Equipment and Supplies:  $800 to $3,000

16.  Additional Funds – 3 months:  $25,000 to $35,000

  • This estimates the funds needed to cover your initial expenses for the first 3 months of operation (besides the items separately identified in the table). It includes payroll costs but not any owner’s draw or salary. However, this is only an estimate and you might need additional working capital during the Shop’s first 3 months of operation and for a longer time period after that.
  • The franchisor relied on its affiliates’ approximately 19 years of experience developing and operating Potbelly Shops to compile this Additional Funds estimate.

17.  Total Estimated Initial Investment (excluding real estate lease/acquisition costs):  $564,050 to $782,700

For Drive Thru Location

  • The total estimated initial investment necessary to begin operation of a drive thru Potbelly Sandwich Shop location ranges from $605,800 to $846,000.

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