Under what circumstances can an Aunt Millies Bakeries distributor sell collateral?
Aunt_Millies_Bakeries Franchise · 2025 FDDAnswer from 2025 FDD Document
- §9.4 ACTIONS FOLLOWING TERMINATION: Termination under either Section 9.2 or Section 9.3 above, shall entitle AUNT MILLIE'S to operate the business for the account of the DISTRIBUTOR, deducting from the revenues generated the reasonable expenses of such performance and delivering the balance, if any, to DISTRIBUTOR. Termination shall require DISTRIBUTOR to sell the Distribution Rights, and in the event that DISTRIBUTOR has not consummated a sale to a qualified purchaser within 90 days of the date of termination, AUNT MILLIE'S shall be authorized to sell DISTRIBUTOR'S Distribution Rights to such a purchaser at the best price which can be obtained after proper notice and advertisement. Said sale shall be for the account of the DISTRIBUTOR, and the provisions of Sections 7.3, 7.4 and 7.5 hereof shall apply.
Source: Item 23 — RECEIPT (FDD pages 44–196)
What This Means (2025 FDD)
According to the 2025 Aunt Millies Bakeries FDD, a distributor is required to sell their distribution rights upon termination of the Distribution Agreement. If the distributor fails to sell to a qualified purchaser within 90 days of termination, Aunt Millies Bakeries is authorized to sell the distributor's rights. This sale will be conducted at the best obtainable price after proper notice and advertisement, with the proceeds benefiting the distributor, subject to specific conditions outlined in Sections 7.3, 7.4, and 7.5 of the agreement.
This means that if an Aunt Millies Bakeries distributor's agreement is terminated, they are obligated to sell their rights. The distributor has a 90-day window to find a buyer themselves. If they cannot, Aunt Millies Bakeries steps in to handle the sale.
The proceeds from the sale of the distribution rights, after deducting any expenses, go to the distributor. This process ensures that the distributor receives fair value for their rights even after the agreement ends, although the final sale price is subject to market conditions and the franchisor's efforts to find a buyer. This is a fairly standard practice in franchising, as it allows for a smooth transition of the business and protects the value of the franchise system.