What collateral secures the notes receivable for Aunt Millies Bakeries?
Aunt_Millies_Bakeries Franchise · 2025 FDDAnswer from 2025 FDD Document
In consideration of the premises and agreements contained herein and other good and valuable consideration, the sufficiency and receipt of which is hereby acknowledged, the parties agree as follows:
- 1. GRANT OF SECURITY INTEREST: To secure the full and complete payment and performance when due (whether at stated maturity, by acceleration or otherwise) of each of the Obligations (as hereafter defined), the Borrower hereby grants, conveys, assigns and transfers to Secured Party a security interest in and to the following personal property:
- a) any and all rights that the Borrower may have under the Distributor's Agreement between PERFECTION BAKERIES, INC., d/b/a AUNT MILLIE'S and Borrower;
- b) all equipment, inventory, accounts, goods, property, contract rights, chattel paper and general intangibles related to or arising from Borrower's business, whether now or hereafter existing or acquired and wherever located;
- c) any and all accessions, replacements and additions to or of the foregoing; and
- d) all cash or non-cash proceeds (including insurance proceeds) of the foregoing, the items described in a), b), c), and d) above being hereinafter collectively referred to as the "collateral".
Source: Item 23 — RECEIPT (FDD pages 44–196)
What This Means (2025 FDD)
According to Aunt Millies Bakeries's 2025 Franchise Disclosure Document, the collateral securing the obligations includes several categories of personal property. These include any rights the borrower (the franchisee) has under the Distributor's Agreement with Perfection Bakeries, Inc., which operates as Aunt Millie's. Additionally, the collateral encompasses all equipment, inventory, accounts, goods, property, contract rights, chattel paper, and general intangibles related to or arising from the franchisee's business, regardless of when they were acquired or where they are located. This broad definition ensures that a wide range of assets can be used to secure the obligations.
Furthermore, the collateral extends to any accessions, replacements, and additions to the aforementioned items, as well as all cash and non-cash proceeds, including insurance proceeds, derived from these assets. This comprehensive approach means that any increase in value or conversion of the original assets into other forms (such as cash from sales or insurance payouts) remains subject to the security interest. This provides Aunt Millie's with a robust claim on the franchisee's business assets in the event of default.
In practical terms, this security agreement means that a prospective Aunt Millie's franchisee is pledging a significant portion of their business assets to secure their financial obligations. This is a common practice in franchising, as it protects the franchisor's investment and ensures that franchisees have a vested interest in fulfilling their contractual duties. However, franchisees should be fully aware of the extent of the collateral and the implications of default, which could include the loss of these assets.