What assets does the DISTRIBUTOR grant a security interest in to Aunt Millies Bakeries?
Aunt_Millies_Bakeries Franchise · 2025 FDDAnswer from 2025 FDD Document
- §3.7 SECURITY INTEREST: To secure the payment of any indebtedness or liability of DISTRIBUTOR to AUNT MILLIE'S, now or hereafter arising, pursuant to this Agreement or otherwise, DISTRIBUTOR hereby grants and conveys to AUNT MILLIE'S a continuing and general security interest in the Distribution Rights, all other assets used in connection with the exercise and operation of the Distribution Rights, all rights hereunder and all Products and receivables of the DISTRIBUTOR, and grants to AUNT MILLIE'S the rights of a secured party. DISTRIBUTOR agrees to execute the AUNT MILLIE'S Security Agreement and financing statement(s) to evidence such security interest. Any default under the AUNT MILLIE'S Security Agreement by DISTRIBUTOR shall be a default under this Agreement.
Source: Item 23 — RECEIPT (FDD pages 44–196)
What This Means (2025 FDD)
According to Aunt Millies Bakeries' 2025 Franchise Disclosure Document, to secure any debts or liabilities to Aunt Millie's, the distributor grants a security interest in several assets. These include the Distribution Rights themselves, all other assets used in operating the Distribution Rights, all rights under the Distribution Agreement, and all Products and receivables of the distributor. This essentially means Aunt Millie's Bakeries has a claim on these assets as collateral.
Furthermore, the distributor agrees to sign Aunt Millie's Bakeries' Security Agreement and financing statements to formally document this security interest. Any failure to comply with the Security Agreement constitutes a breach of the Distribution Agreement. This gives Aunt Millie's Bakeries significant protection in case the distributor defaults on their financial obligations.
In practical terms, this means that if a distributor owes Aunt Millie's Bakeries money and fails to pay, Aunt Millie's Bakeries can seize the assets listed above to recover the debt. This is a common practice in franchising to protect the franchisor's financial interests. Prospective franchisees should carefully review the Security Agreement to fully understand the implications of granting this security interest and the conditions under which Aunt Millie's Bakeries could exercise its rights as a secured party.