How is the balance of the proceeds from the Aunt Millies Bakeries Collateral applied?

According to Aunt Millies Bakeries' 2025 Franchise Disclosure Document, when a distributor sells their distribution rights, the proceeds from the sale are handled in a specific order. First, any monies owed by the distributor to Aunt Millies Bakeries are deducted. Next, a reasonable reserve is set aside to cover open accounts. After that, all reasonable costs and expenses associated with the sale are subtracted, including the cost of removing any off-code or damaged products from the distributor's sales area. Finally, any outstanding debts, liens, security interests, legal fees, and similar expenses are satisfied.

After all these deductions, the remaining balance of the proceeds is then turned over to the distributor. This process ensures that Aunt Millies Bakeries recovers any outstanding debts and covers expenses related to the sale before the distributor receives the remaining funds.

For a prospective Aunt Millies Bakeries franchisee, this means that if they decide to sell their distribution rights, they will not receive the full sale price. Instead, the proceeds will be used to settle any outstanding obligations to Aunt Millies Bakeries and cover the costs associated with the sale. Understanding this process is crucial for financial planning and assessing the potential return on investment when considering selling the distribution rights.