Is an Aunt Millies Bakeries borrower allowed to assign assets pledged as collateral?

According to Aunt Millies Bakeries's 2025 Franchise Disclosure Document, a borrower is generally prohibited from transferring assets pledged as collateral without prior written consent. Specifically, the FDD states that "the transfer of any of the assets pledged as Collateral for this Note, without the prior written consent of the Note Holder" constitutes a default. This means that if a franchisee pledges assets as collateral for a loan or other obligation, they cannot sell, lease, pledge, or otherwise transfer those assets without first obtaining written permission from the note holder, which is typically the lender.

This restriction protects the lender's interest in the collateral. If a franchisee were allowed to freely transfer or dispose of the pledged assets, the lender's security interest would be undermined, potentially jeopardizing their ability to recover the outstanding debt in case of default. By requiring prior written consent, the lender can assess the impact of the proposed transfer on the value and availability of the collateral and decide whether to approve it.

However, there is an exception. The document states that the borrower may execute general liens and grant security interests to and in favor of PERFECTION BAKERIES, INC., Distribution Services of America, Inc. and B&G Leasing, Inc. for obligations other than those created under the current agreement. This exception allows the franchisee to grant security interests to these specific entities without requiring additional consent, as long as those obligations are separate from the financing agreement in question.

For a prospective Aunt Millies Bakeries franchisee, this means understanding the implications of pledging assets as collateral. It is crucial to be aware that any transfer of those assets will require the lender's written consent, which could impact the franchisee's flexibility in managing their business and personal finances. Additionally, franchisees should carefully review the terms of any financing agreements to fully understand the restrictions on transferring pledged assets and the circumstances under which the lender's consent may be required or withheld.