What happens if an Anago subfranchisor fails to comply with franchise regulations?
Anago Franchise · 2025 FDDAnswer from 2025 FDD Document
Subfranchisor shall comply with, and assist Franchisor to the fullest extent possible in Franchisor's efforts to comply with, the Anti-Terrorism Laws (as defined below). Subfranchisor shall not hire nor have any dealings with any person listed on the SDN List, as it may be modified from time to time. Subfranchisor is solely responsible for ascertaining what actions must be taken by Subfranchisor to comply with all Anti-Terrorism Laws. Subfranchisor specifically acknowledges and agrees that Subfranchisor's indemnification obligations under this Agreement pertain to Subfranchisor's obligations under this Section. Any misrepresentation by Subfranchisor under this Section, or any violation of any Anti-Terrorism Laws by Subfranchisor, Subfranchisor's owners, principals or employees, shall constitute grounds for immediate termination of this Agreement and any other agreement Subfranchisor has entered into with Franchisor or its Affiliates.
If Subfranchisor fails to satisfy any of the foregoing conditions, Franchisor shall have the right, in its sole discretion, to not grant a Successor Anago Subfranchise Rights Agreement, and, in such event, shall have the right to exercise all rights afforded to it upon the termination of this Agreement.
(f) If Subfranchisor denies the Franchisor the right to inspect his or her Subfranchise Business or to audit the accounting records of his or her Subfranchise Business;
(g) If Subfranchisor, contrary to this Agreement, purports to transfer any rights or obligations under this Agreement, or any interest in Subfranchisor, to any third party without first obtaining Franchisor's prior written consent as required under this Agreement;
(h) If Subfranchisor, or any of its directors, officers or owners, discloses or divulges in any material respect the contents of the Anago Manuals or other trade secret or Confidential Information in violation of this Agreement;
(i) If Subfranchisor knowingly maintains false books or records, or knowingly submits any false reports to Franchisor or refuses to submit reports or documents as requested within a reasonable time period but not to exceed 90 days;
(j) If Franchisor has received more than three complaints from Unit Franchisees in the Area in a 12-month period, or more than two complaints from Unit Franchisees in the Area in a 6 month period that, in the reasonable discretion of Franchisor, are justified and are adversely affecting the System;
(k) If Subfranchisor fails to comply with the in-term covenants set forth in Section 10.2 of this Agreement;
(l) If Subfranchisor misuses or makes any unauthorized use of the Proprietary Marks or any other identifying characteristics of the System, or otherwise materially impairs the goodwill associated therewith or Franchisor's rights therein; or
(m) If Subfranchisor fails to comply with any provision of this Agreement on two (2) or more occasions during any consecutive six-month period or on three (3) or more occasions during any consecutive twelve-month period, regardless of whether Franchisor notified Subfranchisor of such defaults and whether the defaults were cured by Subfranchisor.
(n) If Subfranchisor fails to use the proprietary software or systems as directed by the Franchisor.
Source: Item 23 — RECEIPTS (FDD pages 62–298)
What This Means (2025 FDD)
According to Anago's 2025 Franchise Disclosure Document, a subfranchisor's failure to comply with regulations can lead to significant repercussions, including the potential termination of their agreement. Specifically, if a subfranchisor violates any Anti-Terrorism Laws, it constitutes grounds for immediate termination of the Anago Subfranchise Rights Agreement, as well as any other agreements they have with Anago or its affiliates. This strict stance underscores the importance Anago places on adhering to legal and ethical standards.
In addition to Anti-Terrorism Laws, the agreement outlines other instances of non-compliance that can lead to termination. These include denying Anago the right to inspect the subfranchise business or audit accounting records, transferring rights or obligations without prior written consent from Anago, disclosing confidential information from the Anago Manuals, maintaining false books or records, or submitting false reports to Anago. Furthermore, if Anago receives more than three justified complaints from unit franchisees within a 12-month period (or more than two complaints in a 6-month period) that adversely affect the Anago system, it can also trigger termination.
Other actions that could lead to termination include misusing Anago's proprietary marks, failing to comply with in-term covenants, or failing to use proprietary software or systems as directed by Anago. Moreover, repeated non-compliance with any provision of the agreement—specifically, two or more violations in a consecutive six-month period or three or more violations in a consecutive twelve-month period—can result in termination, regardless of whether Anago provided notice or the subfranchisor cured the defaults.
Furthermore, if the Subfranchisor fails to satisfy certain conditions, Anago retains the right to deny a Successor Anago Subfranchise Rights Agreement. In such cases, Anago can exercise all rights afforded to it upon the termination of the agreement. These stipulations highlight the critical need for subfranchisors to maintain diligent oversight of their operations and ensure strict adherence to all regulatory and contractual obligations to avoid potential termination and protect their investment.