Does the restriction on owning a Competitive Business during the term of the Anago subfranchise agreement apply to a 5% or less beneficial interest in a publicly-held corporation?
Anago Franchise · 2025 FDDAnswer from 2025 FDD Document
- (ii) own, maintain, operate, engage in, provide assistance to, consult with, lend to, lease any real property to, or have any interest, direct or indirect, or be connected in any other capacity with a Competitive Business which is located or operated within (a) the Area, (b) any other System Subfranchisor's Area, or (c) 20 miles of the perimeter of the Area or any other System Subfranchisor's Area (this restriction does not apply to a 5% or less beneficial interest in a publicly-held corporation); and
Source: Item 23 — RECEIPTS (FDD pages 62–298)
What This Means (2025 FDD)
According to Anago's 2025 Franchise Disclosure Document, the restriction on owning a Competitive Business during the term of the Anago subfranchise agreement does not apply to a 5% or less beneficial interest in a publicly-held corporation. This means that a subfranchisee can own a small stake in a publicly traded company that might be considered a competitor without violating the terms of the agreement.
This exception allows Anago subfranchisees to diversify their investments without necessarily conflicting with their obligations to Anago. However, it is important to note that this exception is specifically limited to a 5% or less beneficial interest. Any larger ownership stake could be construed as a violation of the agreement, potentially leading to legal or financial repercussions.
It is also important to note that this exception only applies to publicly-held corporations. Owning any interest in a privately held competitor, regardless of the size, could still be a violation of the Anago subfranchise agreement. Subfranchisees should carefully consider these restrictions when making investment decisions to ensure they remain in compliance with their contractual obligations.