Does the UCC-1 filing for Aunt Millies Bakeries apply only to the state where the franchise is located?

According to the 2025 FDD, the UCC-1 filing for Aunt Millies Bakeries does not necessarily apply only to the state where the franchise is located. The FDD states that "Accounts" are defined in the Uniform Commercial Code (UCC) as in effect in the state of organization of the Distributor. This implies that the definition and application of the UCC, including security interests, are tied to the state where the distributor (franchisee) is organized, not necessarily where the franchise is physically located.

This distinction is important because it clarifies which state's laws govern the accounts and security interests. For a prospective Aunt Millies Bakeries franchisee, this means that the UCC-1 filing and related regulations will be based on the state in which their business entity is organized, which may or may not be the same as the state where they operate their distribution rights. This could affect how Aunt Millies Bakeries perfects its security interest in the franchisee's assets and how claims are handled in case of default.

For example, if an Aunt Millies Bakeries franchisee incorporates their business in Delaware but operates in Pennsylvania, Delaware's UCC laws would govern the accounts. This could have implications for filing locations, priority of liens, and other legal considerations. Franchisees should consult with legal counsel to understand the specific implications of this provision based on their individual circumstances and the state in which they choose to organize their business.

Therefore, it is essential for potential Aunt Millies Bakeries franchisees to understand the implications of the UCC as it applies to their state of organization and how it interacts with the security interests granted to Aunt Millies Bakeries. This ensures they are fully aware of their obligations and rights under the Distribution Agreement.