What is the arbitrator prohibited from doing regarding the terms of the Southern Steer agreement?
Southern_Steer Franchise · 2025 FDDAnswer from 2025 FDD Document
The Parties recognize and any mediator, arbitrator and judge is affirmatively advised, that certain provisions of this Agreement reflect rights of Franchisor and Franchisee to take (or refrain from taking) certain actions in exercise of its business judgment based on its assessment of the long term interests of the franchised system as a whole.
Where such discretion has been exercised and is supported by the business judgment of Franchisor or Franchisee, a mediator, arbitrator or judge will not substitute his or her judgment for the judgment so exercised by Franchisor or Franchisee.
Source: Item 22 — ITEM. 22 CONTRACTS (FDD pages 61–168)
What This Means (2025 FDD)
According to the 2025 Southern Steer Franchise Disclosure Document, an arbitrator or judge is specifically advised not to substitute their own judgment for the business judgment exercised by Southern Steer or the franchisee when such discretion has been used and is supported by their business judgment. This means that certain provisions of the franchise agreement reflect the rights of both Southern Steer and the franchisee to make decisions based on their assessment of the long-term interests of the franchise system.
This clause aims to prevent an arbitrator from second-guessing the business decisions made by either party, provided those decisions are reasonably justified. This is a fairly common provision in franchise agreements, designed to protect the franchisor's strategic decisions and the franchisee's operational choices, as long as they are made in good faith and with a reasonable basis.
For a prospective Southern Steer franchisee, this means that if a dispute arises and goes to arbitration, the arbitrator is not supposed to impose their own business strategies or operational methods on either party. Instead, the arbitrator should focus on whether the actions taken were within the bounds of reasonable business judgment. This can be beneficial for both the franchisee and Southern Steer, as it respects their autonomy in making business decisions within the framework of the franchise agreement.