Where are the situations described that constitute an 'Event of Default' in the Anago Unit Franchise Agreement?
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 cease to perform contracted service to the Accounts for more than 3 consecutive days without Our consent;
- (b) If You fail or refuse to comply with any mandatory specification, standard or operating procedure We require in this Agreement, in the Manual or otherwise in writing, on the cleanliness or sanitation of the Anago Unit Franchise;
- (c) If You, or Your officer, director, owner or managerial employee is convicted of a felony, a crime of moral turpitude or any other crime or offense that We reasonably believe is likely to have a material adverse effect on the System, the Proprietary Property, the goodwill associated with the Proprietary Property, or Our interest in any of the Proprietary Property, unless You immediately and legally terminate the individual as an officer, director, owner and employee;
- (d) If You deny Us the right to inspect the Anago Unit Franchise or to audit the Records of the Anago Unit Franchise;
- (e) If You engage in conduct that is harmful to or reflects unfavorably on You or the System in that the conduct exhibits a reckless disregard for the physical or mental well-being of employees, Clients, Our representatives or the public at large, including battery, assault, sexual harassment or discrimination, racial harassment or discrimination, alcohol or drug abuse or other forms of threatening, outrageous or unacceptable behavior as determined in Our sole discretion;
- (f) If You, contrary to this Agreement, purport to encumber or transfer any rights or obligations under this Agreement (including transfers of any interest in You), without Our written consent;
- (g) If any breach occurs under Sections 6.2 or 13.1 concerning confidentiality and noncompetition covenants;
- (h) If You knowingly maintain false Records, or knowingly submit any false Records to Us;
- (i) If You misuse or make any unauthorized use of the Proprietary Property or otherwise materially impair the goodwill associated with the Proprietary Property or Our rights in the Proprietary Property;
- (j) If You receive from Us 3 or more Notices of Default for the same or similar defaults during any 12 consecutive months, even if all defaults were cured;
- (k) If You lose or voluntarily cease service to all Anago contracts You have agreed to service, and subsequently fail to complete corrective measures classes with 90 days of notice to
attend corrective measures classes;
- (l) If You stop service to contracts assigned to You and decline all subsequent offers of contracts by Anago for a period of 360 days after the last date of service to an Anago Client ; or
- (m) If Anago is unable to contact You because You have vacated Your premises and failed to inform the local Anago office pursuant to Section 8.4 of this Agreement.
SECTION 11.4 TERMINATION BY US - AFTER NOTICE AND RIGHT TO CURE.
If You are in default We may, at Our option, terminate all rights granted to You under this Agreement effective upon delivery of notice to you, following an opportunity to cure the default, as follows: (a) if a serious or imminent threat or danger to public health or safety results from the construction, maintenance or operation of the Anago Unit Franchise and the threat or danger remains uncorrected for 5 days after Your receipt of written notice from Us or a governmental authority. If a cure cannot be reasonably completed in this time, then all reasonable steps to cure must begin within this time, but a cure must be completed promptly within 30 days after receipt of written notice; (b) You violate any health, safety, or sanitation law, ordinance, or regulation and do not correct the failure or refuse to do so within 3 days after written notice from Us or a governmental authority. If a cure cannot be reasonably completed in this time, then all reasonable steps to cure must begin within this time, but a cure must be completed within 30 days after receipt of written notice; and (c) except as otherwise provided above, You have 30 days after delivery from Us of a written Notice of Default specifying the nature of the default to remedy any default other than as stated above, and provide evidence of cure satisfactory to Us.
Source: Item 23 — RECEIPTS (FDD pages 62–298)
What This Means (2025 FDD)
According to Anago's 2025 Franchise Disclosure Document, several situations can trigger an 'Event of Default' under the Unit Franchise Agreement, leading to potential termination of the agreement. These events are detailed in Section 11.2 and 11.3.
Section 11.2 outlines conditions that cause automatic termination without notice. These include violations of environmental laws that damage the Anago system, insolvency, making an assignment for the benefit of creditors, filing for bankruptcy (or having a petition filed against you that isn't dismissed within 45 days), being adjudicated bankrupt, facing equity proceedings for a receiver, engaging in proceedings for composition with creditors, having an unsatisfied final judgment exceeding $5,000 for 30 days or longer (unless a supersedeas bond is filed), facing execution levied against your operation or property, or selling a substantial portion of your property after levy.
Section 11.3 describes defaults that can lead to termination after Anago provides notice. These include ceasing contracted services for more than 3 days without consent, failing to comply with cleanliness or sanitation standards, conviction of a felony or similar crime that could harm Anago's reputation, denying Anago the right to inspect the franchise or audit records, engaging in harmful conduct, unauthorized transfer of rights, breaches of confidentiality or noncompetition covenants, maintaining false records, misusing proprietary property, or receiving three or more default notices within 12 months for similar issues, even if cured. Additionally, an event of default occurs if a franchisee fails to comply with any requirements of the agreement or manual, or fails to carry out the agreement in good faith. The franchisee bears the burden of proving they properly cured any default.
These provisions are typical in franchise agreements, designed to protect the franchisor's brand and system standards. Prospective Anago franchisees should carefully review these default clauses to understand their obligations and the potential consequences of non-compliance. Understanding these conditions is crucial for maintaining a healthy relationship with Anago and avoiding potential termination of the franchise agreement.