What liens, security agreements, and encumbrances are permitted on the receivables sold to Aunt Millies Bakeries?
Aunt_Millies_Bakeries Franchise · 2025 FDDAnswer from 2025 FDD Document
- §3.5 PURCHASE OF RECEIVABLES: AUNT MILLIE'S shall purchase from DISTRIBUTOR, and the DISTRIBUTOR HEREBY sells, assigns and transfers to AUNT MILLIE'S, all of DISTRIBUTOR'S right, title and interest in and to all of DISTRIBUTOR'S properly filled out and executed charge slips, all existing and future Accounts arising from the sale of Products to Chains or Outlets in the Sales Area and all proceeds thereof from the DISTRIBUTOR, at their face value, net of all discounts, free and clear of all liens, security agreements and encumbrances, other than in favor of, or permitted (in writing) by, AUNT MILLIE'S and its principal lender.
Source: Item 23 — RECEIPT (FDD pages 44–196)
What This Means (2025 FDD)
According to Aunt Millies Bakeries' 2025 Franchise Disclosure Document, when a distributor sells their receivables to Aunt Millie's Bakeries, these receivables must be free and clear of all liens, security agreements, and encumbrances. The only exceptions to this are liens, security agreements, or encumbrances in favor of Aunt Millie's Bakeries or those that Aunt Millie's Bakeries has explicitly permitted in writing, including those of its principal lender.
This means that as a distributor, you cannot have any outstanding debts or obligations that would give another party a claim against the money owed to you by customers (Chains or Outlets) for the products you've sold. Any such existing claims would need to be resolved before Aunt Millie's Bakeries will purchase the receivables. This protects Aunt Millie's Bakeries' interest in acquiring those receivables without risk of third-party claims.
For a prospective franchisee, this condition highlights the importance of maintaining a clean financial record and avoiding any situations that could lead to liens or encumbrances on your business assets, specifically your accounts receivable. Failure to do so could impact your ability to sell receivables to Aunt Millie's Bakeries, which in turn could affect your cash flow and overall financial stability as a distributor.