Can an Anago franchisee use the Proprietary Property as security for debt?
Anago Franchise · 2025 FDDAnswer from 2025 FDD Document
You may not use the Proprietary Property as security for any obligation or indebtedness.
Source: Item 13 — TRADEMARKS (FDD pages 38–41)
What This Means (2025 FDD)
According to Anago's 2025 Franchise Disclosure Document, franchisees are explicitly prohibited from using the Proprietary Property as security for any obligation or debt. The Proprietary Property includes the Proprietary Marks, Confidential Information, and copyrighted information that franchisees are entitled to use under the Subfranchise Rights Agreement. This restriction is in place to protect Anago's trademarks and other intellectual property.
This means that a prospective Anago franchisee cannot use the brand's trademarks, confidential information, or copyrighted materials as collateral to secure financing for their business or any other personal debts. This is a fairly standard clause in franchise agreements, as franchisors want to maintain strict control over their brand and prevent its misuse. Allowing franchisees to use the Proprietary Property as security could potentially jeopardize the brand if the franchisee defaults on their obligations.
The FDD also states that the franchisee's use of the Proprietary Property and any goodwill established by that use inures to the exclusive benefit of Anago. The Subfranchise Rights Agreement does not confer any goodwill or other interest in the Proprietary Property to the franchisee, other than the right to operate an Anago Subfranchise Rights Business in compliance with the Subfranchise Rights Agreement in the Area. This further emphasizes that the franchisee's rights to the Proprietary Property are limited to operating the franchise and do not extend to using it for financial gain or security.
Therefore, it is crucial for potential Anago franchisees to understand that they cannot leverage the brand's assets for borrowing purposes. They will need to explore other avenues for financing their franchise, such as personal savings, loans secured by other assets, or Small Business Administration (SBA) loans. This restriction is a key consideration when evaluating the financial aspects of investing in an Anago franchise.