After the Anago subfranchise agreement terminates, is the Subfranchisor allowed to solicit Business Affiliates of Anago to compete against Anago?
Anago Franchise · 2025 FDDAnswer from 2025 FDD Document
Section 9.4 - Cessation of Operation
- (a) Subfranchisor will immediately cease operation of the Subfranchise Business and shall not directly or indirectly, at any time or in any manner identify itself or any business as a current or former Anago Subfranchise, franchisee, licensee or dealer of, or otherwise associated with, Franchisor or the System. Without limiting the generality of the foregoing, Subfranchisor shall immediately: (i) cease selling Unit Franchises for the Franchisor; (ii) cease using all advertising materials, forms and other materials bearing the Proprietary Marks; (iii) cease holding itself out as a Subfranchisor of Franchisor; (iv) take all steps necessary to disassociate itself from Franchisor and the System; (v) cease solicitations of Clients; (vi) cease all communication with all Clients; (vii) cease providing services to Unit Franchisees; and (viii) promptly and at its own expense make the alterations Franchisor may specify in the Anago Manuals (or otherwise) to distinguish the Premises clearly from its former appearance in order to prevent public confusion. Franchisor is free to sell new Unit Franchises, enter into new Subfranchise rights agreements or other arrangements in the Area without any obligation to the Subfranchisor. Subfranchisor shall immediately assign all Client Accounts to Franchisor in accordance with Section 9.5 below.
Source: Item 23 — RECEIPTS (FDD pages 62–298)
What This Means (2025 FDD)
According to the 2025 Anago FDD, after the subfranchise agreement terminates, the Subfranchisor must cease operation of the Subfranchise Business and cannot directly or indirectly identify itself as a current or former Anago Subfranchise. The Subfranchisor must cease selling Unit Franchises for Anago, cease using advertising materials with Anago's Proprietary Marks, and cease holding itself out as a Subfranchisor of Anago. The Subfranchisor must also take steps to disassociate itself from Anago and the System.
Specifically, the subfranchisor is prohibited from soliciting Clients or communicating with them, and must cease providing services to Unit Franchisees. The subfranchisor must also make alterations to distinguish the premises from its former appearance to prevent public confusion. Anago is then free to sell new Unit Franchises or enter into new Subfranchise rights agreements in the area without obligation to the Subfranchisor. The subfranchisor must assign all Client Accounts to Anago.
However, the FDD excerpts provided do not explicitly state whether the Subfranchisor is allowed to solicit Business Affiliates of Anago to compete against Anago after the termination of the agreement. For clarification, a prospective franchisee should inquire directly with Anago about any restrictions on soliciting Anago's Business Affiliates post-termination to fully understand the scope of permissible and prohibited activities.