What constitutes a 'chronic breach' of the Aunt Millies Bakeries agreement that allows for immediate termination?
Aunt_Millies_Bakeries Franchise · 2025 FDDAnswer from 2025 FDD Document
- §9.3 CURABLE BREACH: A breach of this Agreement or a breach of any agreement with any Affiliate of AUNT MILLIE's, other than a breach under Section 9.2, AUNT MILLIE'S shall give DISTRIBUTOR three (3) business days written notice within which DISTRIBUTOR may cure the breach. "Affiliate" of AUNT MILLIE's shall include any company which has common ownership with AUNT MILLIE's and which provides goods and services, including financing services, to DISTRIBUTOR. If DISTRIBUTOR fails to cure such breach within said three (3) business day period, AUNT MILLIE'S may thereafter terminate this Agreement and DISTRIBUTOR shall have no further right to cure; provided, further, that the parties agree that repeated violations constitute a chronic breach and threaten significant harm to AUNT MILLIE'S, its trademarks or commercial reputation, and in such event AUNT MILLIE'S shall be entitled to terminate this Agreement pursuant to Section 9.2 and DISTRIBUTOR shall have no further right to cure.
Source: Item 23 — RECEIPT (FDD pages 44–196)
What This Means (2025 FDD)
According to Aunt Millies Bakeries' 2025 Franchise Disclosure Document, a 'chronic breach' involves repeated violations of the agreement that pose a significant threat to Aunt Millie's, its trademarks, or its commercial reputation. If such repeated violations occur, Aunt Millie's has the right to terminate the agreement immediately, and the distributor loses the opportunity to correct the breach. This is in accordance with section 9.2 of the agreement.
This provision is important for prospective franchisees because it highlights the need to maintain consistent compliance with the franchise agreement. Unlike a curable breach, which allows a three-day window to correct the issue, a chronic breach results in immediate termination without any chance for correction. This could lead to a sudden loss of the franchise and its associated income.
The FDD specifies that after termination under either section 9.2 or 9.3, Aunt Millie's is entitled to operate the business for the distributor's account. They will deduct reasonable expenses from the revenues generated and deliver the balance, if any, to the distributor. The distributor is required to sell the Distribution Rights, and if a sale to a qualified purchaser is not completed within 90 days of termination, Aunt Millie's is authorized to sell the Distribution Rights at the best obtainable price after providing proper notice and advertisement. The sale will be for the distributor's account, subject to the provisions of Sections 7.3, 7.4, and 7.5.
This clause protects Aunt Millie's from ongoing harm due to a distributor's repeated failures, while also outlining the process for recouping losses and transferring the distribution rights. Prospective franchisees should carefully review the franchise agreement to understand what actions could be considered a 'chronic breach' and take steps to ensure consistent compliance to avoid termination.