Following the termination of the Anago subfranchise agreement, is the Subfranchisor allowed to operate a Competitive Business within 20 miles of another System Subfranchisor's Area?

According to Anago's 2025 Franchise Disclosure Document, a Subfranchisor is restricted from operating a Competitive Business within a specific geographic range after the termination of their agreement. The agreement states that the Subfranchisor cannot own, maintain, operate, engage in, provide assistance to, consult with, lend to, lease any real property to, or have any interest in a Competitive Business. This restriction applies to businesses located or operated within the Subfranchisor's Area, any other System Subfranchisor's Area, or within 20 miles of the perimeter of either the Area or any other System Subfranchisor's Area. However, this restriction does not apply if the Subfranchisor has a 5% or less beneficial interest in a publicly-held corporation.

This clause is designed to protect Anago's existing Subfranchisors and Unit Franchisees from direct competition by a former Subfranchisor who may have gained knowledge and experience from the Anago system. The agreement emphasizes that these geographical restrictions are considered fair and reasonable and are not the result of overreaching or coercion. The Subfranchisor also acknowledges that adhering to these covenants will not cause undue hardship or impair their ability to find suitable employment or income.

The Subfranchisor also agrees that disregarding these provisions would prevent Anago from selling another Unit Franchise in the Area and other areas. It would also allow the Subfranchisor to unfairly capitalize on the goodwill and training provided by Anago and its Affiliates. The Unit Franchisees and Company-Owned Units within the System could be severely disadvantaged if the Subfranchisor competes without authorization.

In practical terms, this means that if a prospective Anago Subfranchisor is considering leaving the system, they must be aware of these restrictions and plan their future business activities accordingly. They will not be able to operate a competing business within the specified area, which could limit their options. It is important for potential Subfranchisors to carefully consider these restrictions and ensure they are comfortable with them before entering into the agreement.