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

According to the 2025 Aunt Millies Bakeries FDD, a borrower is restricted from leasing assets pledged as collateral without prior written consent from the note holder. Specifically, the FDD states that a default by the borrower can occur if there is an "assignment, lease, pledge or other transfer of any of the assets pledged as Collateral for this Note, without the prior written consent of the Note Holder." This means that if a franchisee pledges assets as collateral for a loan, they cannot lease those assets to someone else unless they get permission beforehand.

This condition protects the lender by ensuring that the collateral remains under the borrower's control and is not encumbered by additional agreements that could diminish its value or availability in case of default. For a prospective Aunt Millies Bakeries franchisee, this implies that they need to carefully consider which assets they pledge as collateral, as their ability to use those assets flexibly (such as leasing them out for additional income) will be restricted.

It is common practice for lenders to impose restrictions on the use of collateral to mitigate their risk. Franchisees should discuss with Aunt Millies Bakeries and the lender what assets are typically required as collateral and what the specific conditions are regarding their use. Understanding these restrictions upfront is crucial for managing business operations and financial planning.