How are the proceeds from the collateral of an Aunt Millies Bakeries distributor applied after expenses are paid?

According to Aunt Millies Bakeries' 2025 Franchise Disclosure Document, when a distributor's rights are sold, the proceeds are applied in a specific order. First, any monies owed by the distributor to Aunt Millies Bakeries are deducted. Next, a reasonable reserve is set aside to cover open accounts. Then, all reasonable costs and expenses associated with the sale are subtracted; this includes the cost of removing any off-code or damaged products from the distributor's sales area. Finally, any outstanding debts, liens, security interests, legal fees, and similar expenses are satisfied. After all these deductions, the remaining proceeds are then turned over to the distributor.

This process ensures that Aunt Millies Bakeries recovers any outstanding debts and covers the costs associated with the sale before the distributor receives any funds. For a prospective franchisee, this means that if they decide to sell their distribution rights, the amount they ultimately receive will depend on their financial standing with Aunt Millies Bakeries and the expenses incurred during the sale. It is important for franchisees to maintain good financial records and minimize outstanding debts to maximize their proceeds from any potential sale.

It is also important to note that the distributor is responsible for executing an appropriate bill of sale to the purchaser and a general release terminating their rights under the Distribution Agreement. This release also waives any claims against Aunt Millies Bakeries and its affiliates. In turn, Aunt Millies Bakeries will execute a new Distribution Agreement with the purchaser, using the form of agreement then in use by Aunt Millies Bakeries.