Can Aunt Millies Bakeries unreasonably withhold approval of a Distribution Rights transfer?
Aunt_Millies_Bakeries Franchise · 2025 FDDAnswer from 2025 FDD Document
- §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.
- §7.2 SALE OF STOCK: The transfer of a controlling interest in Distributor shall be deemed a transfer of the Distribution Rights and shall be subject to all of the terms and conditions of this Article 7.
Source: Item 23 — RECEIPT (FDD pages 44–196)
What This Means (2025 FDD)
According to Aunt Millies Bakeries's 2025 Franchise Disclosure Document, a distributor's Distribution Rights are transferable, contingent upon certain conditions. Specifically, any sale or transfer is subject to the prior written approval of Aunt Millie's Bakeries, but this approval cannot be unreasonably withheld. This provision protects the distributor from arbitrary denial of a transfer request.
However, Aunt Millie's Bakeries also retains a right of first refusal, allowing them to purchase the Distribution Rights on the same terms offered by a bona fide purchaser. Aunt Millie's Bakeries has ten business days to notify the distributor whether they do not approve of the offeror or wish to exercise their right of first refusal. This timeframe begins after Aunt Millie's Bakeries receives written notice of the intended sale, a personal interview with the offeror's controlling shareholder, and the offeror's financial statements and other relevant information.
If Aunt Millie's Bakeries's right of approval and first refusal expire without being exercised, the distributor is free to complete the transfer to the offeror under the agreed terms. This process ensures that Aunt Millie's Bakeries has the opportunity to assess potential transferees and maintain brand standards, while also preventing them from unduly blocking legitimate transfer attempts by the distributor. The transfer of a controlling interest in the Distributor is considered a transfer of Distribution Rights and is subject to the same conditions.