Under the Anago Collateral Assignment, what rights does the Subfranchisor retain regarding the Client Accounts before a default is declared?

According to Anago's 2025 Franchise Disclosure Document, a Subfranchisor retains all rights under the Client Accounts until Anago Franchising, Inc. (AFI) declares a default under the Subfranchise Agreement. This means that before a default is declared, the Subfranchisor continues to manage and operate the Client Accounts as usual. This includes maintaining client relationships, providing services, and handling billing and collections.

However, it is important to note that Anago retains certain rights and controls over these accounts even before a default. For example, the Subfranchisor must use client contracts approved by Anago, refer all National Accounts to Anago, and follow Anago's procedures for invoicing and collecting payments. Anago also has the right to assist the Subfranchisor in collecting payments from clients if it deems necessary. The Subfranchisor must also notify Anago of any client complaints and provide copies of written complaints.

In practical terms, this means that while the Subfranchisor has day-to-day control over the Client Accounts before a default, they must still operate within the guidelines and procedures set by Anago. This collateral assignment ensures that Anago has a security interest in the Client Accounts and can step in to manage them if the Subfranchisor defaults on their obligations under the Subfranchise Agreement. This arrangement protects Anago's interests and ensures continuity of service for the clients.

Prospective Subfranchisors should carefully review the terms of the Collateral Assignment and the Subfranchise Agreement to fully understand their rights and obligations regarding the Client Accounts, both before and after a default. Understanding these conditions is crucial for managing their business effectively and maintaining a good relationship with Anago.