What constitutes an Event of Default under the equipment lease with Bimbo Foods Bakeries Distribution?
Bimbo_Foods_Bakeries_Distribution Franchise · 2025 FDDAnswer from 2025 FDD Document
Lessee shall be in default of this Lease upon the happening of any of the following events or conditions ("Events of Default"): (a) Lessee fails to pay any rent or other amount when due; (b) Lessee fails to observe, keep or perform any other covenants or provisions of this Lease required to be observed, kept, or performed, by Lessee; (c) Lessee tries to remove, sell, transfer, encumber, create a security interest in, or part with possession of the Equipment, or perform any act tending to impair Lessor's title to Equipment; (d) Lessee makes a misrepresentation to Lessor of any matter or covenant connected with this Lease: (e) Lessee fails to satisfy any traffic ticket or summons or fails to register the Equipment; (f) Lessee becomes insolvent, bankrupt or has a trustee or receiver appointed for Lessee or for a substantial part of Lessee's property; (g) Lessee experiences a material change in its business or affairs, (including but not limited to change in control or ownership or Termination of its Distribution Agreement referred to in Paragraph 24 below) which in Lessor's judgment impairs the security of the Equipment or increases the credit risk involved therein; (h) Lessee fails to notify Lessor of any material change in its business and affairs, including a change in the ownership or control of Lessee; (i) failure of Lessee to execute or maintain the assignment of receivables referred to in Paragraph 2 above.
Source: Item 14 — Other Accounts Payable and Accrued Liabilities (FDD pages 312–476)
What This Means (2025 FDD)
According to Bimbo Foods Bakeries Distribution's 2025 Franchise Disclosure Document, several conditions can trigger an Event of Default under the equipment lease. These include failing to pay rent or any other amount when due, failing to adhere to any covenant or provision of the lease, or attempting to remove, sell, transfer, encumber, or create a security interest in the equipment. Any action that impairs the Lessor's title to the equipment can also trigger a default.
Further events that can cause a default are making a misrepresentation to the Lessor, failing to satisfy any traffic ticket or summons, or failing to register the equipment. Additionally, insolvency, bankruptcy, or the appointment of a trustee or receiver for the franchisee or their property can lead to default. A material change in the franchisee's business or affairs, including changes in control or ownership or termination of the Distribution Agreement, which impairs the security of the equipment or increases credit risk, also constitutes an event of default.
Finally, failing to notify the Lessor of any material change in the business, including changes in ownership or control, or failing to execute or maintain the assignment of receivables also constitutes an Event of Default under the lease with Bimbo Foods Bakeries Distribution. These terms are typical in franchise agreements to protect the franchisor's assets and financial interests.