What is the impact on Anago receipts if a franchisee's officer is convicted of a felony?
Anago Franchise · 2025 FDDAnswer from 2025 FDD Document
of Your real or personal property used in the Anago Unit Franchise is sold after levy by any sheriff, marshal or constable.
- (b) You will notify Us within 3 days of the occurrence of any of the events described in Subsection 11.2(a).
- (c) If at any time the Subfranchise Rights Agreement is terminated, this Agreement will also terminate; provided, however, that AFI may in its sole discretion, and upon notice to you, assume Our rights and obligations under this Agreement.
SECTION 11.3 TERMINATION BY US - AFTER NOTICE.
If You are in default We may, at Our option, terminate all rights granted to You under this Agreement, without affording You an opportunity to cure the default, effective immediately upon notice to You, upon the occurrence of any of the following Events of Default:
- (a) If You c
Source: Item 23 — RECEIPTS (FDD pages 62–298)
What This Means (2025 FDD)
According to Anago's 2025 Franchise Disclosure Document, if a franchisee's officer is convicted of a felony, a crime of moral turpitude, or any other crime or offense that Anago reasonably believes is likely to have a material adverse effect on the System, the Proprietary Property, the goodwill associated with the Proprietary Property, or Anago's interest in any of the Proprietary Property, Anago has the option to terminate all rights granted to the franchisee under the agreement. This termination can occur immediately upon notice, without affording the franchisee an opportunity to cure the default, unless the franchisee immediately and legally terminates the individual as an officer, director, owner, and employee.
This clause is significant for prospective Anago franchisees because it highlights the importance of ensuring that all officers, directors, owners, and managerial employees have a clean criminal record and maintain ethical conduct. A felony conviction of someone in a leadership position can have severe repercussions, potentially leading to the termination of the franchise agreement and loss of the business. The determination of whether a crime has a material adverse effect is at Anago's discretion, which introduces an element of subjectivity.
Most franchise agreements contain clauses that allow the franchisor to terminate the agreement if the franchisee engages in illegal or unethical behavior that could harm the brand. However, the specific triggers for termination can vary. Prospective franchisees should carefully review the termination clauses in the FDD and franchise agreement to understand the full range of circumstances that could lead to termination. It is also important to understand the franchisor's policies and procedures for addressing potential violations of the agreement and to have a plan in place for addressing any issues that may arise.