Is the franchisee required to cooperate with Aunt Millies Bakeries in maintaining the UCC-1 filing?
Aunt_Millies_Bakeries Franchise · 2025 FDDAnswer from 2025 FDD Document
- §3.7 SECURITY INTEREST: To secure the payment of any indebtedness or liability of DISTRIBUTOR to AUNT MILLIE'S, now or hereafter arising, pursuant to this Agreement or otherwise, DISTRIBUTOR hereby grants and conveys to AUNT MILLIE'S a continuing and general security interest in the Distribution Rights, all other assets used in connection with the exercise and operation of the Distribution Rights, all rights hereunder and all Products and receivables of the DISTRIBUTOR, and grants to AUNT MILLIE'S the rights of a secured party. DISTRIBUTOR agrees to execute the AUNT MILLIE'S Security Agreement and financing statement(s) to evidence such security interest. Any default under the AUNT MILLIE'S Security Agreement by DISTRIBUTOR shall be a default under this Agreement.
Source: Item 23 — RECEIPT (FDD pages 44–196)
What This Means (2025 FDD)
According to Aunt Millies Bakeries's 2025 Franchise Disclosure Document, the distributor (franchisee) is required to grant Aunt Millie's Bakeries a security interest in the Distribution Rights and other assets. To formalize this, the distributor must execute Aunt Millie's Bakeries' Security Agreement and financing statements, which serve as evidence of the security interest. This security interest ensures that any financial obligations the distributor owes to Aunt Millie's Bakeries are secured by the distributor's rights and assets.
Specifically, the distributor grants Aunt Millie's Bakeries a continuing security interest in several key assets. These include the Distribution Rights themselves, all other assets used in the operation of these rights, all rights under the agreement, and all products and receivables of the distributor. This comprehensive security interest gives Aunt Millie's Bakeries a strong position in the event the distributor defaults on any payments or other obligations.
This type of security agreement is a fairly standard practice in franchising, particularly when the franchisee is granted significant rights or access to valuable resources. It protects Aunt Millie's Bakeries' financial interests by allowing them to claim the specified assets if the distributor fails to meet their financial obligations. The requirement for the distributor to execute the Security Agreement and financing statements underscores the importance of this security interest to Aunt Millie's Bakeries.