Does Aunt Millies Bakeries have to provide a reason for disapproving a potential buyer of distribution rights?
Aunt_Millies_Bakeries Franchise · 2025 FDDAnswer from 2025 FDD Document
ARTICLE 7 TRANSFER OF RIGHTS
- §7.1 CONDITIONS OF ASSIGNABILITY: The Distribution Rights are owned by the DISTRIBUTOR and may be sold or otherwise transferred in whole or in part by DISTRIBUTOR, provided that any such sale or transfer shall be subject to: (a) the prior written approval of AUNT MILLIE'S, which approval will not be unreasonably withheld; and (b) a right of first refusal on the part of AUNT MILLIE'S at the same terms and conditions offered to DISTRIBUTOR (the "Offer") by a bona fide purchaser or transferee (the "Offeror"). The right of approval and right of refusal referred to herein shall expire unless DISTRIBUTOR is notified by AUNT MILLIE'S that it does not approve the Offeror or that it wishes to exercise its right of first refusal by notice given within ten (10) business days after the last to occur of the following:
- i. receipt by AUNT MILLIE'S of written notice of intent to sell or transfer to a named Offeror on terms and conditions fully set forth in such notice; and
- ii. a personal interview of the Offeror's controlling shareholder by a designated AUNT MILLIE'S representative; and
- iii. receipt by AUNT MILLIE'S of the Offeror's and Offeror's controlling shareholder's current financial statements and such additional information as is relevant concerning the Offeror's and Offeror's controlling shareholder's financial condition, health, credit, driving record, and other matters reasonably appropriate to AUNT MILLIE'S' determination. If the contemplated sale or transfer is not a bona fide transfer for value, the price to be paid by AUNT MILLIE'S shall be the fair market value of the Distribution Rights at the time of receipt of such notice of intent. If AUNT MILLIE'S right of approval and right of first refusal expire as provided above DISTRIBUTOR may consummate the transfer to the Offeror on the terms of the Offer.
Source: Item 23 — RECEIPT (FDD pages 44–196)
What This Means (2025 FDD)
According to Aunt Millies Bakeries's 2025 Franchise Disclosure Document, the distribution rights are owned by the distributor and can be sold or transferred, provided that Aunt Millie's Bakeries gives prior written approval, which will not be unreasonably withheld. Aunt Millie's Bakeries also has the right of first refusal based on the terms offered to the distributor by a potential buyer, also known as the "Offeror".
The right of approval and first refusal will expire unless Aunt Millie's Bakeries notifies the distributor that it does not approve of the Offeror or wishes to exercise its right of first refusal within ten business days after receiving written notice of the intent to sell or transfer, a personal interview with the Offeror's controlling shareholder, and the receipt of the Offeror's financial statements and other relevant information. This information includes the Offeror's and their controlling shareholder's financial condition, health, credit, driving record, and other matters that Aunt Millie's Bakeries deems reasonably appropriate for their determination.
In practical terms, this means that while Aunt Millie's Bakeries has the right to approve or disapprove a potential buyer, they cannot unreasonably withhold that approval. If Aunt Millie's Bakeries wants to reject a potential buyer, they should have a legitimate, documented reason for doing so, based on the criteria outlined in the agreement, such as financial stability, creditworthiness, or other relevant factors. If Aunt Millie's Bakeries fails to respond within the specified timeframe or cannot provide a reasonable basis for disapproval, the distributor is free to proceed with the sale to the Offeror.