After the termination of the Anago subfranchise agreement, can a Subfranchisor own or operate a Competitive Business within 20 miles of the perimeter of any other System Subfranchisor's Area?
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
(iii)in any manner interfere with, disturb, disrupt, decrease or otherwise jeopardize the business of Franchisor or any of its other Subfranchisors and Unit Franchisees.
(c) Subfranchisor acknowledges and agrees that the length of the term and geographical restrictions contained in this Agreement are fair and reasonable and not the result of overreaching, duress or coercion of any kind and do not impose a greater restraint than is necessary to protect the goodwill or other business interests of Franchisor.
Subfranchisor agrees that his or her full, uninhibited and faithful observance of each of the covenants in this Section will not cause any undue hardship, financial or otherwise, and that enforcement of each of the covenants contained in this Section will not impair his or her ability to obtain employment commensurate with his or her abilities and on terms fully acceptable to him or her or otherwise to obtain income required for the comfortable support of him or her and his or her family, and the satisfaction of the needs of his or her creditors.
- (d) Subfranchisor agrees that to disregard the provisions of this ARTICLE would effectively foreclose Franchisor from selling another Unit Franchise in the Area and other areas and Subfranchisor could ride freely and unfairly on the laurels of goodwill of and training from Franchisor and its Affiliates.
Moreover, the Unit Franchisees and Company-Owned Units within the System could be severely disadvantaged if Subfranchisor competes, without authorization, against them using the Proprietary Marks and other Confidential Information of the System.
Source: Item 23 — RECEIPTS (FDD pages 62–298)
What This Means (2025 FDD)
According to Anago's 2025 Franchise Disclosure Document, a Subfranchisor is restricted from engaging in a Competitive Business after the termination of their agreement. Specifically, the Subfranchisor cannot own, maintain, operate, assist, consult with, lend to, lease property to, or have any direct or indirect interest in a Competitive Business. This restriction applies within the Subfranchisor's Area, any other System Subfranchisor's Area, or within 20 miles of the perimeter of either the Subfranchisor's Area or any other System Subfranchisor's Area. A minor exception exists for owning 5% or less of a publicly-held corporation.
This restriction is designed to protect Anago and its other Subfranchisors and Unit Franchisees from competition by a former Subfranchisor who has gained knowledge and experience through the Anago system. The FDD states that disregarding these provisions would prevent Anago from selling another Unit Franchise in the Area and other areas. It also acknowledges that the Subfranchisor could unfairly benefit from the goodwill and training provided by Anago.
The agreement emphasizes that the Subfranchisor acknowledges the fairness and reasonableness of these restrictions, agreeing that they are not overly restrictive and do not cause undue hardship. The Subfranchisor also agrees that adhering to these covenants will not impair their ability to find suitable employment or income. This suggests that Anago believes the restrictions are necessary to protect its business interests and are balanced against the Subfranchisor's ability to earn a living after the agreement ends.
In summary, a former Anago Subfranchisor faces significant restrictions on operating a competing business after the termination of their agreement, including a 20-mile buffer zone around other Subfranchisor areas. This is a standard practice in franchising to protect the brand and other franchisees from unfair competition. Prospective Subfranchisors should carefully consider these restrictions and their potential impact on future business opportunities.