Can the Secured Party exercise its rights independently or in combination regarding an Aunt Millies Bakeries distributorship?
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.
Source: Item 23 — RECEIPT (FDD pages 44–196)
What This Means (2025 FDD)
According to Aunt Millies Bakeries's 2025 Franchise Disclosure Document, Aunt Millie's retains significant rights as a secured party. Specifically, to secure any debts or liabilities a distributor owes to Aunt Millie's, the distributor grants Aunt Millie's a continuing security interest in the Distribution Rights, all assets used in operating the Distribution Rights, all rights under the agreement, and all Products and receivables of the distributor.
This security interest allows Aunt Millie's to protect its financial interests in the event a distributor defaults on their obligations. The distributor must also sign Aunt Millie's Security Agreement and financing statements to formally acknowledge this security interest. Any failure to comply with the Security Agreement constitutes a default under the Distribution Agreement itself.
In practical terms, this means that Aunt Millie's has a legal claim on the distributor's business assets up to the amount of the outstanding debt. This could include the right to seize and sell the distribution rights, inventory, and accounts receivable to recover what is owed. For a prospective franchisee, this highlights the importance of maintaining good financial standing with Aunt Millie's to avoid triggering the security interest and potentially losing their distributorship and related assets.