If you are looking towards opening a Potbelly Sandwich Shop Franchise, it will be nice for you to have a preview of what the company represents before going ahead to enquire about the total cost of opening the franchise in your location.

Potbelly Sandwich Shop was founded in 1977 and they began franchising in 2009, about 11 years ago. The current CEO is Alan Johnson and they have their corporate head office at 222 Merchandise Mart Plaza, 23rd Floor Chicago, IL 60654, USA. As of the 2019 Franchise Disclosure Document, there are 41 franchised Potbelly Sandwich locations in the USA. Potbelly Sandwich Works has franchise locations in 18 states. The largest region is the Midwest with 22 franchise locations.

Potbelly are committed to serving simple ingredients done right– toasty warm sandwiches, craveable salads, delicious soup, fresh baked cookies, and hand-dipped milkshakes and smoothies.

Here are areas where you are expected to spend money and the costs associated with it;

  1. Initial Investment Range

    $1,114,800 to $1,876,200

  2. Initial Franchise Fee

    $55,000

Please note that 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.

  1. Development Fee

    $40,000 for the first Shop, plus a deposit of $20,000 for each additional Shop

Please note that 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.

  1. Market Introduction Program

    $1,000 to $7,000

Please note that you must spend at least $25,000 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 and this payment is not refundable.

  1. Miscellaneous Items

    $12,000 to $15,000

Please note that 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.

  1. Royalty

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

The Due Date is 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).

  1. Brand Fund: Currently, 0.5% of Shop’s weekly Gross Sales

The Due Date for this fee is Due each Wednesday on Gross Sales during week ending on preceding Sunday (each week currently runs from Monday through Sunday).

Please note that Potbelly may, upon 6 months’ prior notice to you, increase your Brand Fund contribution by up to an additional 3.5% of the Shop’s Gross Sales (for a total of up to 4% of the Shop’s Gross Sales) to the extent Potbelly concurrently and proportionately reduces your minimum required Local Marketing Spend and required Area Cooperative expenditures.

Your minimum required advertising/marketing expenditures will not exceed a total of 4% of the Shop’s Gross Sales.

  1. 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

The Due Date for this fee is When you acquire successor franchise after initial franchise term expires.

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

The Due Date for this fee is ½ due (and nonrefundable) when you request transfer approval; balance due before transfer completed.

Please note that this is Due if you transfer Franchise Agreement and Shop, or your owners transfer controlling ownership interest in you or your owners.

  1. Transfer (Non-Controlling Transfers): $500 and the Due Date for this fee is When you request transfer approval.

Please note that this fee is Due if your owners transfer non-controlling ownership interest in you or your owners.

  1. Transfer (Convenience of Ownership): $500 and the Due Date for this fee is When you request transfer approval.

Please note that this fee is Due if you transfer Franchise Agreement and Shop to entity you or your owners control for convenience of ownership.

  1. Additional Training or “Re-Training:” Up to $250 per day for each trainer Potbelly uses to instruct you and the Due Date for this fee is When training begins.

Please note that 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.

  1. Special Assistance: Up to $250 per day, plus out-of-pocket costs and expenses and the Due Date for this fee is as incurred.

Please note that Potbelly may charge you for additional or special guidance, assistance, or training that it determines you need or that you request.

  1. Product and Service Purchases: Varies depending on products and services you buy from Potbelly or its affiliates and the Due Date for this fee is as incurred.

Please note that 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.

  1. Computer Systems, Maintenance, and Support: $200 to $225 per month for non-Drive Thru locations; $225 to $250 per month for Drive-Thru locations and the Due Date for this fee is Monthly.

Please note that this fee 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.

  1. Franchise System Website: Up to $50 per month and the Due Date for this fee is as incurred.

Please note that the 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) the Brand Fund does not cover these costs.

  1. Intranet: Up to $20 per month and the Due Date for this fee is as incurred.

Please note that The 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) the Brand Fund does not cover these costs.

  1. Email Hosting and Support Fee: Currently, $200 annually and the Due Date for this fee is Payable annually within 30 days after billing.

Please note that this is Due if you ask Potbelly to give you a designated email address for your Shop; Potbelly may increase this fee if its costs increase.

  1. Annual Convention: Up to $1,000 and the Due Date for this fee is When billed.

Please note that 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.

  1. Franchisee Advisory Council: Council assessments and the Due Date for this fee is When levied.

Please note that Potbelly has the right to enforce payments, which may vary among councils; there currently are no councils.

  1. Testing: Costs of testing and the Due Date for this fee is When billed.

Please note that this covers the costs of testing new products or inspecting new suppliers you propose; test costs depend on nature of products and supplier location.

  1. Relocation: 20% of Potbelly’s then-current initial franchise fee and the Due Date for this fee As incurred.

Please note that you must pay Potbelly a relocation fee if you move to a new site and Potbelly is involved in the process.

  1. Public Offering: At least $10,000, plus out-of-pocket expenses and the Due Date for this fee is When billed.

Please note that this is Due to review your offering materials if you seek to raise money through stock or similar offerings.

  1. Operations Manual: $500 and the Due Date for this fee is When billed.

Please note that there is Charge for replacement copy or access if your access to Operations Manual is lost or destroyed.

  1. Audit: Cost of inspection or audit (amount of which depends on circumstances and extent of your non-compliance) and the Due Date for this fee is 15 days after billing.

Please note that this is 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%.

  1. Late Fee: $100 and the Due Date for this fee May be auto-debited from your account.

Please note that this fee is Due for each late or dishonored payment.

  1. Interest: Lesser of 1.5% per month or highest commercial contract interest rate law allows and the Due Date for this fee May be autodebited from your account.

Please note that this fee is Due on all overdue amounts more than 7 days late.

  1. Non-Approved Shop Opening: $5,000 for each day your Shop operates without Potbelly’s approval and the Due Date May be auto-debited from your account.

Please note that this is Due if you begin operating Shop before Potbelly gives its approval.

  1. Management Fee: Manager’s then-current daily salary, plus direct expenses and the Due Date for this fee is as incurred.

Please note that this is Due when Potbelly (or a third party) manages Shop after Managing Owner’s death or disability or after your default or abandonment.

  1. Costs and Attorneys’ Fees: Will vary under circumstances and depend on nature of your non-compliance and the Due Date for this fee is as incurred.

Please note that this fee is only Due when Potbelly incurs costs and expenses to enforce Franchise Agreement against you, whether or not Potbelly begins formal legal proceeding.

  1. Indemnification: Will vary under circumstances and depend on nature of third-party claim and the Due Date for this fee is as incurred.

Please note that 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).

  1. Maintenance Cost Reimbursement: Out-of-pocket cost reimbursement and Potbelly’s then-current per-day fee and the Due Date for this fee is as incurred.

Please note that you must reimburse Potbelly’s costs for correcting your Shop’s sub-standard appearance or condition.

  1. Insurance Reimbursement: Out-of-pocket cost reimbursement and the Due Date for this fee is as incurred.

Please note that 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).

  1. Customer Complaint Reimbursement: Out-of-pocket cost reimbursement and the Due Date for this fee is as incurred.

Please note that you must reimburse Potbelly if it resolves a customer complaint because you do not do so.

  1. Tax Reimbursement: Out-of-pocket cost reimbursement and the Due Date for this fee is as incurred.

Please note that 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).

  1. De-identification Reimbursement: Out-of-pocket cost reimbursement and the Due Date for this fee is as incurred.

Please note that you must reimburse Potbelly’s costs to de-brand the Shop after the franchise ends if you fail to do so as required.

  1. Re-inspection Fee: Up to $2,500 and the Due Date for this fee is as incurred.

Please note that this is Due for 2nd and each subsequent follow-up Shop inspection to confirm you have corrected operating deficiencies Potbelly has brought to your attention.

  1. Non-Compliance Fee: $250 per violation and the Due Date for this fee is Within 5 days.

Due if you deviate from contractual requirement, including System Standard.

Please note that this compensates Potbelly for administrative and management costs, not for its damages due to your default.

  1. Veteran Incentives: This is open for negotiation with the franchisor
  2. Term of Agreement and Renewal: The length of the initial franchise term is 10 years. If requirements are met, franchisees can renew for one additional term of 10 years.
  3. Financial Assistance: Potbelly Sandwich Shop has relationships with third-party sources which offer financing to cover the following: franchise fee, startup costs, equipment, inventory, accounts receivable, and payroll et al.

In Summary,

  • Initial investments: $503,950 – $849,000
  • Net-worth Requirement: $500,000
  • Liquid Cash Requirement: $200,000
  • Ongoing Initial Franchise Fee: $40,000
  • Ongoing Royalty Fee: 6%
  • Ad Royalty Fee: to 4%
How Much Does It Cost to Open Potbelly Sandwich Shop Franchise?