Does the UCC-1 filing for Aunt Millies Bakeries affect the franchisee's ability to sell the franchise?
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.
AUNT MILLIE'S shall credit DISTRIBUTOR'S account therefor.
DISTRIBUTOR shall promptly remit all such slips to AUNT MILLIE'S.
If any Chain elects to settle with DISTRIBUTOR on the basis of scan results, rather than charge slips, the credit to DISTRIBUTOR shall be adjusted for any difference between the charge slip and the actual sales reflected by the scan sale data.
The foregoing sale and purchase shall continue until termination of this Distribution Agreement, or until DISTRIBUTOR gives written notice of the termination of the foregoing sale to AUNT MILLIE'S, or, with respect to specific Accounts only, AUNT MILLIE'S gives notice that such Account's Chain's or Outlet's credit has not been approved by AUNT MILLIE'S.
For purposes of this Section 3.5, "Accounts" shall
mean accounts as defined in the Uniform Commercial Code as in effect in the state of organization of Distributor.
Source: Item 23 — RECEIPT (FDD pages 44–196)
What This Means (2025 FDD)
Based on the 2025 FDD, Aunt Millie's Bakeries purchases the accounts receivable from the distributor, which are defined according to the Uniform Commercial Code (UCC). Specifically, Section 3.5 states that Aunt Millie's purchases all of the distributor's rights, titles, and interests in charge slips and accounts from product sales to chains or outlets within the sales area. This purchase is made free and clear of all liens, security agreements, and encumbrances, except those in favor of Aunt Millie's or permitted by them in writing.
This arrangement continues until the termination of the Distribution Agreement or until either the distributor terminates the sale in writing to Aunt Millie's, or Aunt Millie's notifies that a specific account's credit has not been approved. The FDD does not explicitly state that a UCC-1 filing would prevent a franchisee from selling their franchise. However, the agreement that Aunt Millie's has first rights to the accounts receivable and that they must approve any other liens or encumbrances could impact the franchisee's ability to secure financing or sell the franchise freely.
Prospective franchisees should seek clarification from Aunt Millie's Bakeries regarding the specifics of how the accounts receivable purchase agreement and any related UCC filings might affect their ability to sell or transfer their distribution rights. Understanding the conditions under which Aunt Millie's might withhold approval for a sale or transfer is crucial for making an informed decision.