What is the Anago franchisee's obligation to repay sums expended by the secured party to protect its security interest?
Anago Franchise · 2025 FDDAnswer from 2025 FDD Document
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; (e) all intangible rights related to this Agreement and the Subfranchise Business; and (f) all proceeds upon sale or other disposition of any of the foregoing. The capitalized terms in this Agreement shall have the meanings defined herein and in the Subfranchise Rights Agreement by and between Debtor and Secured Party.
TO SECURE:
- (a) Performance of each agreement of Debtor contained in that certain Subfranchise Rights Agreement between Debtor and Secured Party, dated
Source: Item 23 — RECEIPTS (FDD pages 62–298)
What This Means (2025 FDD)
According to Anago's 2025 Franchise Disclosure Document, the franchisee, referred to as the Debtor, is obligated to repay all sums and amounts that may be advanced or expended by the Secured Party for the maintenance and preservation of the Collateral or any part thereof, or the enforcement of any rights of Secured Party. This obligation is secured by a first priority security interest in the Debtor's Business Assets, which include accounts receivable, books and records, equipment, contracts, intangible rights, and proceeds from the sale of these assets.
In practical terms, this means that if Anago (the Secured Party) has to spend money to protect the assets of the franchisee's business (the Debtor) or to enforce its rights under the franchise agreement, the franchisee is responsible for repaying those expenses. This could include legal fees, costs associated with maintaining equipment, or any other expenses incurred to protect the value of the business assets that serve as collateral.
This provision protects Anago's investment and ensures that it can recover costs associated with protecting its security interest in the franchisee's business. For a prospective franchisee, this highlights the importance of maintaining the business assets and complying with the franchise agreement to avoid situations where Anago needs to expend funds to protect its interests, which would then become the franchisee's responsibility to repay.