Besides what is created under the Anago Subfranchise Agreement, what is the Subfranchisor prohibited from doing with the Business Assets?
Anago Franchise · 2025 FDDAnswer from 2025 FDD Document
ompany in effectuating the assignment.
IN WITNESS WHEREOF, each of the undersigned has executed this Conditional
| The Company holds certain master franchisees | through temporary | ownership due | to the abandonment or returned | |---|---|---|---| | master territories. The operations of these master | franchisees | are maintained with | the full intent of finding an | | unrelated party for resale. During the year ended | December | 31, 2024, 2023, | and 2022 the Company held | TITLE: CEO & PRESIDENT
EXHIBIT VII - SECURITY AGREEMENT
| THIS SECURITY AGREEMENT is entered into, on this date, |
|---|
| by and between Corp. Name located |
| at address |
| (Debtor), and Anago Franchising, Inc. (Secured |
| Party). |
AGREEMENT
For good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Debtor grants to Secured Party a first priority security interest in Debtor's Business Assets (the "Collateral"). For purposes of this Agreement, Debtor's "Business Assets" shall mean: (a) all of Debtor's accounts receivable arising out of, or in connection with, the operation of Debtor's Anago Subfranchise Business, existing as of the date of this Agreement and which come into existence during the Term of the Anago Subfranchise Rights Agreement by and between Debtor and Secured Party, including notes, negotiable instruments, contracts and the Unit Franchisee obligations for the payment of money, all client accounts and their account receivables, all proceeds owing from trips, clubs, parties, lessons, video studies and any other services or activities connected with the operation of the Subfranchise Business (the "Accounts Receivable"); (b) all books and records pertaining to the Debtor's Accounts Receivable; (c) all equipment, furniture and fixtures located at any owned or controlled site of Debtor; (d) all contracts related to each and every Business within the Area including all Anago Unit Franchise Agreements, promissory notes and any leases to which Debtor is a party;
Source: Item 23 — RECEIPTS (FDD pages 62–298)
What This Means (2025 FDD)
According to Anago's 2025 Franchise Disclosure Document, a Subfranchisor's Business Assets are subject to certain restrictions. Anago is granted a first priority security interest in the Subfranchisor's Business Assets to secure the Subfranchise Rights Agreement. These Business Assets include accounts receivable, books and records, equipment, contracts, intangible rights, and proceeds from the sale of these assets. This security interest ensures the Subfranchisor performs their obligations under the Subfranchise Rights Agreement, repays any amounts advanced by Anago for the maintenance of the assets, and adheres to all agreements within the contract.
This means that while the Subfranchisor owns these assets, their use and disposition are encumbered by Anago's security interest. The Subfranchisor cannot freely sell, transfer, or encumber these assets without potentially violating the Subfranchise Agreement. This arrangement protects Anago's interests by ensuring the Subfranchisor fulfills their contractual obligations and maintains the value of the assets associated with the Anago franchise.
For a prospective Anago Subfranchisor, this implies a need to understand the full scope of the Business Assets and the limitations placed upon them. Before entering into the agreement, it would be prudent to seek legal counsel to fully grasp the implications of granting Anago a security interest in these assets. This ensures the Subfranchisor is aware of their rights and responsibilities regarding the management and potential sale of their Anago Subfranchise Business assets.