Who determines how the proceeds of the Aunt Millies Bakeries Collateral are applied?

According to Aunt Millies Bakeries' 2025 Franchise Disclosure Document, in the event of a sale of the distribution rights, the proceeds are for the account of the distributor. However, Aunt Millies Bakeries has specific deductions that are taken from the sale proceeds. These deductions include any monies owed to Aunt Millies Bakeries by the distributor, a reasonable reserve against open accounts, and all reasonable costs and expenses connected with the sale. These expenses can include the cost of removing any off-code or damaged products in the distributor's sales area.

Additionally, the proceeds will be used to satisfy any outstanding debts, liens, security interests, legal fees, and similar expenses. After these deductions, the remaining balance is then turned over to the distributor. This process ensures that Aunt Millies Bakeries recovers any outstanding financial obligations before the distributor receives the remaining funds from the sale.

This section of the FDD outlines a clear order of priority for how the proceeds from the sale of distribution rights are allocated. While the sale is for the distributor's account, Aunt Millies Bakeries ensures its financial interests are protected by deducting outstanding debts and expenses before the distributor receives the final amount. A prospective franchisee should seek clarification regarding what constitutes 'reasonable costs and expenses' to avoid potential disputes during a sale.