What happens to the Anago franchise agreement if the Subfranchise Rights Agreement is terminated?

According to Anago's 2025 Franchise Disclosure Document, the Anago Unit Franchise Agreement will also terminate if the Subfranchise Rights Agreement is terminated. However, Anago Franchising, Inc. (AFI) has the option, at its discretion and with notice to the franchisee, to assume the franchisor's rights and obligations under the Unit Franchise Agreement. This means that while the termination of the Subfranchise Rights Agreement generally leads to the end of the Unit Franchise Agreement, AFI can step in to maintain the agreement.

This provision offers a degree of flexibility for Anago. It allows AFI to ensure continuity and stability within the franchise system even if the Subfranchise Rights Agreement, which governs the relationship between Anago and the subfranchisor, is terminated. This might occur due to various reasons, such as a breach of contract or failure to meet performance standards by the subfranchisor. By assuming the rights and obligations, AFI can directly manage the unit franchise, ensuring that the franchisee continues to operate under the Anago system.

For a prospective Anago franchisee, this clause provides some assurance that their franchise agreement might not automatically end if there are issues with the subfranchisor. However, it's important to note that AFI's decision to assume the agreement is entirely at their discretion. A franchisee should clarify with Anago the conditions under which AFI would likely exercise this option and what factors would influence their decision. Understanding these factors can help a franchisee assess the potential risks and benefits associated with this provision.

It is also important for a prospective franchisee to understand what their rights and obligations would be if AFI steps in to assume the agreement. Would the terms and conditions of the agreement remain the same? Would the franchisee have direct access to Anago's resources and support? These are critical questions to ask during the due diligence process to fully understand the implications of this clause.