What happens if a personal guarantor for an Aunt Millies Bakeries loan dies?
Aunt_Millies_Bakeries Franchise · 2025 FDDAnswer from 2025 FDD Document
The following shall constitute a default by the Borrower:
- a) Borrower's failure to pay to Secured Party when due any obligation secured by this Agreement;
- b) Borrower's failure to comply with or perform any provisions or covenants of this Agreement or any other agreement between Borrower and Secured Party, including Borrower's failure to maintain the insurance required in Article 3 above;
- c) any expiration, cancellation or termination of the Distribution Agreement executed between Borrower and PERFECTION BAKERIES, INC.;
- d) the death of Borrower;
Source: Item 23 — RECEIPT (FDD pages 44–196)
What This Means (2025 FDD)
According to Aunt Millies Bakeries' 2025 Franchise Disclosure Document, the death of the borrower is considered a default. Specifically, if the borrower dies, it constitutes an event of default under the Financing Security Agreement.
This means that upon the death of a borrower, the Secured Party (likely the lender) can exercise its remedies, which may include accelerating the loan, seizing the collateral, and taking other actions to recover the outstanding debt. The collateral includes all rights that the borrower may have under the Distributor's Agreement with Perfection Bakeries, all equipment, inventory, accounts, and other property related to the borrower's business.
This clause protects the lender by allowing them to take immediate action if the borrower dies, as the borrower's ability to manage the business and repay the loan is obviously compromised. For a prospective Aunt Millies Bakeries franchisee, this highlights the importance of having a solid succession plan or key person insurance to cover the loan in the event of death, as well as understanding the implications for their estate and heirs.