What must Anago do to retain the right to possession of the premises under the Collateral Assignment of Lease Agreement?
Anago Franchise · 2025 FDDAnswer from 2025 FDD Document
Assignor shall retain right to possession of the Premises in accordance with the terms and conditions of the Lease until the declaration by Assignee of an Event of Default by Assignor under the SRA.
For purposes of this Agreement, the term "Event of Default" shall mean a default by Assignor under the SRA which remains uncured beyond all applicable notice and cure periods.
Upon: (a) the declaration of an Event of Default by Assignor under the SRA, (b) the expiration of the SRA, (c) termination of the SRA by Assignee for cause, or (d) an expression by Assignor of its desire to terminate the Lease, Assignee may, at its option, upon written notice to Landlord and Assignor, assume the Lease and occupy the Premises.
Upon exercise of this option, Assignee shall be deemed to be substituted as the tenant under the Lease in the place and stead of Assignor and shall be deemed to have assumed expressly all of the terms, covenants and obligations of the Lease therefore applicable to Assignor which arise after Assignee's assumption of the Lease and shall likewise be entitled to enjoy all of the rights and privileges granted to Assignor under the terms and conditions of the Lease.
Notwithstanding the foregoing, in the event Assignee exercises its rights under this paragraph 2, Assignor shall remain obligated under the Lease.
So long as Assignee shall not have exercised its option to take possession of the Premises under the foregoing provisions, Assignee shall not be liable for rent or any other obligation under the Lease, and Assignor shall remain liable for all such rent and obligations.
Source: Item 23 — RECEIPTS (FDD pages 62–298)
What This Means (2025 FDD)
According to Anago's 2025 Franchise Disclosure Document, the Assignor, typically the franchisee, retains the right to possession of the premises as long as Anago, acting as the Assignee, has not declared an Event of Default under the Subfranchise Rights Agreement (SRA). An Event of Default is defined as a default by the Assignor under the SRA that remains unresolved even after all applicable notice and cure periods have passed. This means that as long as the franchisee is meeting their obligations under the SRA and any defaults are resolved within the specified timeframes, they maintain possession of the business premises.
Anago's right to assume the lease and occupy the premises arises under specific conditions: (a) the declaration of an Event of Default by the franchisee under the SRA, (b) the expiration of the SRA, (c) termination of the SRA by Anago for cause, or (d) an expression by the franchisee of its desire to terminate the Lease. Upon any of these events, Anago has the option, with written notice to both the landlord and the franchisee, to step in and take over the lease. If Anago exercises this option, it becomes the tenant in place of the franchisee and assumes all obligations of the lease that arise after the assumption, while also being entitled to all rights and privileges granted under the lease.
However, even if Anago takes possession, the original franchisee remains obligated under the lease. Furthermore, as long as Anago does not exercise its option to take possession, it is not liable for rent or any other obligations under the lease; these remain the responsibility of the franchisee. This arrangement provides Anago with a security interest in the lease, allowing them to protect their investment in the franchise by ensuring continued operation of the business at that location if the franchisee fails to meet their obligations. This also means that Anago is not responsible for the financial obligations of the lease unless they decide to take over the premises.
This clause protects Anago while also outlining the circumstances under which a franchisee could lose control of their business location. Prospective franchisees should carefully review the definition of "Event of Default" in the SRA to fully understand what actions or failures could trigger Anago's right to assume the lease. Franchisees should also be aware that even if Anago takes over the lease, they may still be responsible for the lease obligations.