During the Default Period, what right does Anago Franchisor have regarding Client receipts?
Anago Franchise · 2025 FDDAnswer from 2025 FDD Document
During any period that Subfranchisor is in default of this Agreement, and for 90 days thereafter (the "Default Period"), Franchisor will have the right to deposit and hold in the Anago Escrow Account certain Client receipts (the "Escrow Receipts"), less any funds owed to Franchisor or its affiliates for royalties, accounting fees, service fees (bank fees, credit card fees, or other fees relating to billing and collections), advertising fees, late fees, temporary management fees, interest, and any other payments due to Franchisor its affiliates hereunder.
The Escrow Receipts may be held by Franchisor and distributed directly to the Unit Franchisee the Escrow Receipt owed, less amounts due, as delineated in the Unit Franchise Agreement.
Subfranchisor's residual amounts may remain in the Anago Escrow Account for the duration of the Default Period, and may be offset by amounts owed to Franchisor.
Franchisor will be obliged to pay each Unit Franchisee only for receipts that Franchisor deposits into the Anago Escrow Account.
Each Escrow Receipt will be credited for the invoice the Client designates, and will be distributed to the Unit Franchisee accordingly.
If Franchisor determines that Subfranchisor has collected a Client receipt and subsequently failed to pay the corresponding Unit Franchisee timely pursuant to the terms of the Unit Franchise Agreement directly, the Franchisor may deduct and offset the same amount from Subfranchisor's escrow account.
Franchisor may independently consult with each Unit Franchisee and Client to determine the amount of funds the Unit Franchisee is owed.
During the Default Period, Subfranchisor agrees to cooperate fully with Franchisor to expedite full and timely payment to each Unit Franchisee.
Source: Item 23 — RECEIPTS (FDD pages 62–298)
What This Means (2025 FDD)
According to Anago's 2025 Franchise Disclosure Document, during the Default Period, Anago has specific rights regarding client receipts. The Default Period is defined as the time the Subfranchisor is in default of the agreement and for 90 days after. During this time, Anago has the right to deposit and hold certain client receipts, referred to as "Escrow Receipts," into the Anago Escrow Account. From these Escrow Receipts, Anago can deduct funds owed to them or their affiliates for royalties, accounting fees, service fees (including bank fees and credit card fees), advertising fees, late fees, temporary management fees, interest, and any other payments due.
Anago may then distribute the remaining Escrow Receipts directly to the Unit Franchisee to whom the receipt is owed, after deducting any amounts due as outlined in the Unit Franchise Agreement. Any residual amounts belonging to the Subfranchisor may remain in the Anago Escrow Account for the duration of the Default Period and can be used to offset any amounts the Subfranchisor owes to Anago. Anago is only obligated to pay Unit Franchisees for receipts that Anago deposits into the Anago Escrow Account. Each Escrow Receipt will be credited for the invoice the Client designates and distributed to the Unit Franchisee accordingly.
Furthermore, if Anago determines that the Subfranchisor collected a client receipt but failed to pay the corresponding Unit Franchisee in a timely manner, Anago can deduct the same amount from the Subfranchisor's escrow account. Anago can also independently consult with each Unit Franchisee and Client to determine the amount of funds owed to the Unit Franchisee. During the Default Period, the Subfranchisor must fully cooperate with Anago to ensure timely payments to each Unit Franchisee.