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Considering a Potbelly Sandwich Works Franchise? Don’t Overlook These 39 Important Franchise Fees

by Franchise Chatter on August 12, 2017

in Franchise Fees, Sandwich Franchise



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If you are considering a Potbelly Sandwich Works franchise, don’t get blindsided by these 39 important franchise fees (from the initial franchise fee, to the royalty fee, to 37 other fees found in Items 5 and 6 of Potbelly Sandwich Works’ 2017 FDD).

1.  Initial Franchise Fee:  $40,000

  • You must pay Potbelly a $40,000 initial franchise fee in full when you sign the Franchise Agreement.
  • Potbelly uses the initial franchise fee to cover, among other things, the costs of evaluating your proposed site, providing the initial training program, and helping you develop and open your Shop (although the initial franchise fee is not in exchange for any particular products, services, or assistance).

2.  Development Fee:  $40,000 for the first Shop, plus a deposit of $20,000 for each additional Shop

  • If you sign Potbelly’s Development Rights Rider to the Franchise Agreement because you commit to develop multiple Potbelly Shops in an area, Potbelly currently charges a development fee that you must pay in full when you sign the Development Rights Rider.
  • You must pay a $40,000 initial franchise fee for each Shop to be developed. The development fee due when you sign the Franchise Agreement and Development Rights Rider equals the full $40,000 for the first Shop plus a deposit of $20,000 for each additional Shop.
  • The balance of the initial franchise fee (that is, $20,000) for each additional Shop (after the first) is due when you sign the Franchise Agreement for that Shop.
  • Potbelly and you will determine the number of Shops you must develop, and the dates by which you must develop them, before signing the Development Rights Rider.
  • The lone development fee Potbelly received during its 2016 fiscal year was $100,000.

3.  Market Introduction Program:  $1,000 to $7,000



  • You must spend at least $1,000 and up to $7,000 on a Shop market introduction program beginning before and continuing 6 months after your Shop opens.
  • You must send Potbelly a written introductory marketing program showing how you intend to spend this money 90 days before your Shop opens.
  • At Potbelly’s request, you must pay Potbelly the program’s anticipated costs, which it then will spend for you.
  • This payment is not refundable.

4.  Miscellaneous Items:  $12,000 to $15,000

  • You currently must buy from PSW, LLC certain items you need to develop and begin operating your Shop, including interior menu boards and signage, interior custom lighting, artifacts and décor, and tabletops and bases.
  • These items are expected to cost a total of $12,000 to $15,000. These payments are not refundable.

5.  Royalty:  6% or 7% of Shop’s weekly Gross Sales, depending on total fiscal year Gross Sales

  • Due Date:  Due each Wednesday on Gross Sales during week ending on preceding Sunday (each week currently runs from Monday through Sunday).
  • “Gross Sales” means all your revenue from operating Shop (and includes your proceeds from business interruption insurance) but (i) excludes taxes collected from customers and paid to taxing authority, (ii) excludes your revenue from selling or issuing Potbelly gift or loyalty cards (but your revenue from selling Products to customers using those cards for payment is included in Gross Sales), and (iii) is reduced by any documented refunds and credits the Shop in good faith gives to customers (if those amounts originally were included in calculating Gross Sales).

6.  Production Fee:  currently 0.5% of Shop’s weekly Gross Sales (this fee may be increased by majority vote of open and operating Potbelly Shops)

  • Due Date:  Due each Wednesday on Gross Sales during week ending on preceding Sunday (each week currently runs from Monday through Sunday).

7.  Brand Fund:  currently up to 2.5% of Shop’s weekly Gross Sales (this cap may be increased by majority vote of open and operating Potbelly Shops)

  • Due Date:  Due each Wednesday on Gross Sales during week ending on preceding Sunday (each week currently runs from Monday through Sunday).
  • Potbelly had not started collecting this fee as of the 2017 Disclosure Document’s issuance date.

8.  Successor Franchise:  25% or 12.5% of Potbelly’s then-current initial franchise fee if your successor franchise is for 10 years or 5 years, respectively

  • Due Date:  When you acquire successor franchise after initial franchise term expires.

9.  Transfer (Controlling Transfers):  20% or 50% of Potbelly’s then-current initial franchise fee depending on whether transferee is an existing Potbelly franchisee

  • Due Date:  ½ due (and nonrefundable) when you request transfer approval; balance due before transfer completed.
  • Due if you transfer Franchise Agreement and Shop, or your owners transfer controlling ownership interest in you or your owners.

10.  Transfer (Non-Controlling Transfers):  $500

  • Due Date:  When you request transfer approval.
  • Due if your owners transfer non-controlling ownership interest in you or your owners.

11.  Transfer (Convenience of Ownership):  $500

  • Due Date:  When you request transfer approval.
  • Due if you transfer Franchise Agreement and Shop to entity you or your owners control for convenience of ownership.

12.  Additional Training or “Re-Training:”  up to $250 per day for each trainer Potbelly uses to instruct you

  • Due Date:  When training begins.
  • Potbelly provides initial training for up to 4 people at no additional charge at one of its designated company training Shops; it may charge you for training replacements if your original trainees cannot complete training, for training additional or newly-hired personnel, and for supplemental training programs.

13.  Special Assistance:  up to $250 per day, plus out-of-pocket costs and expenses



  • Due Date:  As incurred.
  • Potbelly may charge you for additional or special guidance, assistance, or training that it determines you need or that you request.

14.  Product and Service Purchases:  Item 8 describes your purchasing obligations

  • Due Date:  As incurred.
  • You will buy Potbelly Trade Secret Products, Potbelly Branded Products, and other products and services from Potbelly, its affiliates, designated and approved vendors whose items meet Potbelly’s standards and specifications, and/or other suppliers to the industry.
  • Prices depend on the supplier and item/service involved.

15.  Computer Systems, Maintenance, and Support:  $175 to $200 per month for non-Drive Thru locations; $200 to $225 per month for Drive-Thru locations

  • Due Date:  Monthly.
  • This covers all technical support for Potbelly-approved software and hardware systems and up to 4 price change requests per year; additional fees may be charged as realized for special requests or system support; Potbelly may increase this charge if its costs increase.

16.  Franchise System Website:  up to $50 per month

  • Due Date:  As incurred.
  • The Production Fees and/or Brand Fund may pay for creating, developing, maintaining, and operating a Franchise System Website and/or related strategies; Potbelly may require you to pay a separate fee if (or to the extent) Production Fees or Brand Fund does not cover these costs.

17.  Intranet:  up to $20 per month

  • Due Date:  As incurred.
  • The Production Fees and/or Brand Fund may pay for creating, developing, maintaining, and operating an Intranet; Potbelly may require you to pay a separate fee if (or to the extent) Production Fees or Brand Fund does not cover these costs.

18.  Email Hosting and Support Fee:  currently, $150 annually

  • Due Date:  Payable annually within 30 days after billing.
  • Due if you ask Potbelly to give you a designated email address for your Shop; Potbelly may increase this fee if its costs increase.

19.  Annual Convention:  up to $1,000

  • Due Date:  When billed.
  • Potbelly may charge this fee for you to attend its annual franchise convention (you also must pay your travel and living expenses); this fee is intended to help cover Potbelly’s convention costs.

20.  Franchisee Advisory Council:  council assessments

  • Due Date:  When levied.
  • Potbelly has the right to enforce payments, which may vary among councils; there currently are no councils.

21.  Testing:  costs of testing

  • Due Date:  When billed.
  • This covers the costs of testing new products or inspecting new suppliers you propose; test costs depend on nature of products and supplier location.

22.  Relocation:  20% of Potbelly’s then-current initial franchise fee

  • Due Date:  As incurred.
  • You must pay Potbelly a relocation fee if you move to a new site and Potbelly is involved in the process.

23.  Public Offering:  at least $10,000, plus out-of-pocket expenses

  • Due Date:  When billed.
  • Due to review your offering materials if you seek to raise money through stock or similar offerings.

24.  Operations Manual:  $500

  • Due Date:  When billed.
  • Charge for replacement copy or access if your access to Operations Manual is lost or destroyed.

25.  Audit:  cost of inspection or audit (amount of which depends on circumstances and extent of your non-compliance)

  • Due Date:  15 days after billing.
  • Due if you do not give Potbelly reports, supporting records, or other required information, or understate required Royalties or other amounts by more than 2%.

26.  Late Fee:  $100

  • Due Date:  May be auto-debited from your account.
  • Due for each late or dishonored payment.

27.  Interest:  lesser of 1.5% per month or highest commercial contract interest rate law allows

  • Due Date:  May be autodebited from your account.
  • Due on all overdue amounts more than 7 days late.

28.  Non-Approved Shop Opening:  $5,000 for each day your Shop operates without Potbelly’s approval

  • Due Date:  May be auto-debited from your account.
  • Due if you begin operating Shop before Potbelly gives its approval.

29.  Management Fee:  manager’s then-current daily salary, plus direct expenses

  • Due Date:  As incurred.
  • Due when Potbelly (or a third party) manages Shop after Managing Owner’s death or disability or after your default or abandonment.

30.  Costs and Attorneys’ Fees:  will vary under circumstances and depend on nature of your non-compliance

  • Due Date:  As incurred.
  • Due when Potbelly incurs costs and expenses to enforce Franchise Agreement against you, whether or not Potbelly begins formal legal proceeding.

31.  Indemnification:  will vary under circumstances and depend on nature of third-party claim

  • Due Date:  As incurred.
  • You must reimburse Potbelly if it is held liable for claims from your Shop’s operation or incurs costs to defend them (when it is not at fault).

32.  Maintenance Cost Reimbursement:  out-of-pocket cost reimbursement and Potbelly’s then-current per-day fee

  • Due Date:  As incurred.
  • You must reimburse Potbelly’s costs for correcting your Shop’s sub-standard appearance or condition.

33.  Insurance Reimbursement:  out-of-pocket cost reimbursement

  • Due Date:  As incurred.
  • You must reimburse Potbelly if it obtains required insurance for you if you fail to obtain or maintain required coverage (your failure is a Franchise Agreement default).

34.  Customer Complaint Reimbursement:  out-of-pocket cost reimbursement

  • Due Date:  As incurred.
  • You must reimburse Potbelly if it resolves a customer complaint because you do not do so.

35.  Tax Reimbursement:  out-of-pocket cost reimbursement

  • Due Date:  As incurred.
  • You must reimburse Potbelly for any taxes it must pay to a state taxing authority on account of either your operation or your payments to Potbelly (except for its income taxes).

36.  De-identification Reimbursement:  out-of-pocket cost reimbursement

  • Due Date:  As incurred.
  • You must reimburse Potbelly’s costs to de-brand the Shop after the franchise ends if you fail to do so as required.

37.  Re-inspection Fee:  up to $2,500

  • Due Date:  As incurred.
  • Due for 2nd and each subsequent follow-up Shop inspection to confirm you have corrected operating deficiencies Potbelly has brought to your attention.

38.  Non-Compliance Fee:  $250 per violation

  • Due Date:  Within 5 days.
  • Due if you deviate from contractual requirement, including System Standard.
  • This compensates Potbelly for administrative and management costs, not for its damages due to your default.

39.  Fee for Recruiting/Hiring Existing or Former Certified Key-Holding Supervisory Employees (including Lead Managers) of Potbelly, Its Affiliates, or Other Franchisees to Be Your Employees Without Written Release (before minimum timeframe has expired):  $25,000 per occurrence

  • Due Date:  When billed.
  • Due if you breach your obligation not to recruit or hire the certified keyholding supervisory employees (including Lead Managers) of certain other entities to be your employees for one year after their original employment ends (unless you have a written release).


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