What are the ongoing obligations of the franchisee regarding the UCC-1 filing with Aunt Millies Bakeries?
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.
- §3.8 DEFAULT: Nothing herein shall be deemed to require AUNT MILLIE'S to fill an order of DISTRIBUTOR during any time when DISTRIBUTOR is in default of any payment or other obligation to AUNT MILLIE'S.
Source: Item 23 — RECEIPT (FDD pages 44–196)
What This Means (2025 FDD)
According to Aunt Millies Bakeries' 2025 Franchise Disclosure Document, as part of the Distribution Agreement, the distributor grants Aunt Millie's a security interest in the Distribution Rights and all assets related to those rights. To formalize this, the distributor must execute Aunt Millie's Security Agreement and financing statements. This security interest ensures that any debt or liability the distributor owes to Aunt Millie's is secured by these assets.
In practical terms, this means that if a distributor incurs debt to Aunt Millie's, such as for products or other obligations, Aunt Millie's has a legal claim on the distributor's rights and assets. This claim is documented through the Security Agreement and financing statements, which are filed as a matter of public record under the Uniform Commercial Code (UCC). The UCC-1 filing serves as notice to other creditors that Aunt Millie's has a secured interest in the distributor's assets.
Should the distributor default on their obligations to Aunt Millie's, Aunt Millie's has the right to seize and potentially sell the assets covered by the security agreement to recover the debt. This is a standard practice in franchising to protect the franchisor's financial interests. The distributor's failure to comply with the Security Agreement constitutes a breach of the Distribution Agreement, potentially leading to termination of the agreement.