What happens if an employee of an Aunt Millies Bakeries franchisee violates the Distribution Agreement?
Aunt_Millies_Bakeries Franchise · 2025 FDDAnswer from 2025 FDD Document
- §9.1 BREACH: Except as set forth in this Article, or upon the sale or transfer of all of the DISTRIBUTOR'S Distribution Rights, this Agreement shall not be terminated or canceled, provided DISTRIBUTOR carries out the terms hereof. In the event DISTRIBUTOR breaches any obligations or covenants under this Agreement, AUNT MILLIE'S may terminate the Agreement as set forth below.
- §9.2 NON-CURABLE BREACH: If the breach by DISTRIBUTOR involves criminal activity, threatens public health or safety, constitutes an abandonment of any portion
the Sales Area, or threatens to do significant harm to AUNT MILLIE'S, its trademarks or commercial reputation, AUNT MILLIE'S may terminate this Agreement immediately upon written notice and DISTRIBUTOR shall have no right to cure.
- §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.
- §9.4 ACTIONS FOLLOWING TERMINATION: Termination under either Section 9.2 or Section 9.3 above, shall entitle AUNT MILLIE'S to operate the business for the account of the DISTRIBUTOR, deducting from the revenues generated the reasonable expenses of such performance and delivering the balance, if any, to DISTRIBUTOR. Termination shall require DISTRIBUTOR to sell the Distribution Rights, and in the event that DISTRIBUTOR has not consummated a sale to a qualified purchaser within 90 days of the date of termination, AUNT MILLIE'S shall be authorized to sell DISTRIBUTOR'S Distribution Rights to such a purchaser at the best price which can be obtained after proper notice and advertisement. Said sale shall be for the account of the DISTRIBUTOR, and the provisions of Sections 7.3, 7.4 and 7.5 hereof shall apply.
Source: Item 15 — OBLIGATION TO PARTICIPATE IN THE ACTUAL OPERATION OF THE FRANCHISE BUSINESS (FDD page 31)
What This Means (2025 FDD)
The 2025 Aunt Millie's Bakeries FDD outlines the repercussions for a franchisee's breach of the Distribution Agreement, but it does not specifically address the scenario where an employee of the franchisee violates the agreement. However, since the franchisee is responsible for the actions of its employees, a violation committed by an employee could be treated as a violation by the franchisee themselves.
According to the FDD, if a franchisee breaches any obligations or covenants under the Distribution Agreement, Aunt Millie's Bakeries has the right to terminate the agreement. The termination process depends on whether the breach is curable or non-curable. A non-curable breach, as defined in Section 9.2, involves criminal activity, a threat to public health or safety, abandonment of any portion of the Sales Area, or a significant threat to Aunt Millie's Bakeries' trademarks or commercial reputation. In such cases, Aunt Millie's Bakeries can terminate the agreement immediately with written notice, and the franchisee has no right to cure the breach.
For a curable breach, as described in Section 9.3, Aunt Millie's Bakeries must provide the franchisee with a three-business-day written notice to cure the breach. If the franchisee fails to cure the breach within this period, Aunt Millie's Bakeries can terminate the agreement, and the franchisee loses the right to cure. However, repeated violations are considered a chronic breach that threatens significant harm to Aunt Millie's Bakeries, its trademarks, or commercial reputation, which allows Aunt Millie's Bakeries to terminate the agreement immediately without any further right to cure.
Upon termination, Aunt Millie's Bakeries is entitled to operate the business for the franchisee's account, deducting reasonable expenses from the revenues generated and delivering the balance, if any, to the franchisee. The franchisee is also required to sell the Distribution Rights. If the franchisee fails to complete a sale to a qualified purchaser within 90 days of termination, Aunt Millie's Bakeries is authorized to sell the Distribution Rights at the best obtainable price after providing proper notice and advertisement. The sale proceeds will be for the franchisee's account, subject to the provisions outlined in Sections 7.3, 7.4, and 7.5 of the Distribution Agreement.