What happens to the Distribution Rights when Bimbo Foods Bakeries Distribution terminates a franchisee's Agreement?
Bimbo_Foods_Bakeries_Distribution Franchise · 2025 FDDAnswer from 2025 FDD Document
| 12 | 0 | 142 | | | 2023 | 142 | 35 | 12 | 0 | 17 | 1 | 159 | | | 2024 | 159 | 62 | 13 | 0 | 82 | 0 | 139 | (1) BFBD does not terminate franchise agreements such that a franchisee no longer owns their/its distribution rights. Although the franchise agreement may be terminated in accordance with its terms, and a franchisee is subsequently prohibited from selling BFBD products, the franchisee still owns the distribution rights after termination of the franchise agreement and is entitled to the net proceeds (if any) while BFBD is operating the rights on the franchisee's behalf and whenever the distribution rights are sold. Therefore, when a franchise agreement is terminated there is no corresponding reduction in outlet count since the distribution rights are not terminated, nor do the distribution rights revert to BFBD. Accordingly, Column 5 in Table 3 lists the number of franchise agreements that were terminated in the respective states; however, the number listed in Column 5 is not subtracted from the outlet count as a result of the continued operation of the distribution rights (by BFBD on behalf of the franchisee who has had the franchise agreement terminated) and the franchisee retaining ownership of such distribution rights.
Table No. 4 Status of Company-Owned Outlets For Years 2022 to 2024
| Column 1 | Column 2 | Column 3 | Column 4 | Column 5 | Column 6 | Column 7 | Column 8 |
|---|---|---|---|---|---|---|---|
| Reacquired | Outlets | Outlets at | |||||
| State | Year | Outlets at | Outlets | from | Outlets | Sold to | the End of |
| Start of Year | Opened | Franchisees | Closed | Franchisees | the Year | ||
| AL | 2022 | 1 | 0 | 3 | 0 | 4 | 0 |
| 712 | 2023 | 0 | 2 | 0 | 0 | 2 | 0 |
| 2024 | 0 | 12 | 88 |
Source: Item 20 — OUTLETS AND FRANCHISEE INFORMATION (FDD pages 71–83)
What This Means (2025 FDD)
According to Bimbo Foods Bakeries Distribution's 2025 Franchise Disclosure Document, if the franchise agreement is terminated, the franchisee retains ownership of the distribution rights. Although the franchisee is no longer authorized to operate the distribution business, they still own the distribution rights. This means that even after the agreement is terminated, the distribution rights do not revert back to Bimbo Foods Bakeries Distribution.
Bimbo Foods Bakeries Distribution may temporarily operate these routes until the distribution rights are sold. The franchisee is entitled to the net proceeds from the operation of the rights while Bimbo Foods Bakeries Distribution is operating them on the franchisee's behalf, and also from the eventual sale of the distribution rights. This arrangement ensures that the franchisee can still realize some financial benefit from the distribution rights even after the franchise agreement has been terminated.
This is a somewhat unusual arrangement in franchising. Typically, when a franchise agreement is terminated, all rights revert to the franchisor. The fact that Bimbo Foods Bakeries Distribution allows the franchisee to retain ownership of the distribution rights, and to benefit from their continued operation or sale, could be seen as a benefit to franchisees. However, it is important for a prospective franchisee to fully understand the terms and conditions under which the distribution rights can be sold, and how the net proceeds are calculated and distributed.