Is a clause designating jurisdiction and venue outside of Illinois valid in the Southern Steer Franchise or Multi-Unit Development Agreement?
Southern_Steer Franchise · 2025 FDDAnswer from 2025 FDD Document
Only those portions of the arbitration clause with respect to such claim or claims as are necessary to comply with applicable law will be invalid and considered severable, but the remainder will be enforced.
- Definition of Dispute.
Subject to Section 14.4, "Dispute" means any disputes, controversies or claims between Franchisor, its Affiliate, shareholders, owners, officers, directors, agents, employees and attorneys (in their respective capacity) and Multi-Unit Developer and Controlled Entity (if any) and Multi-Unit Developer and Controlled Entity (if any)'s Operating Principal, Owners, Guarantors, Designated Manager(s), affiliates, officers, directors, agents and employees (collectively, "Parties") (a) arising out of or related to this Agreement or any other agreement between the Parties relating to the Southern Steer Business or the relationship of the Parties hereto; (b) the relationship of the Parties hereto; (c) the Multi-Unit Developer or Controlled Entity's development of Southern Steer Businesses; (d) the scope or validity of this Agreement or any other agreement between the Parties relating to the Southern Steer Business or the relationship of the Parties hereto or any provision thereof (including the validity and scope of the arbitration obligation, which Multi-Unit Developer and Controlled Entity (if any) and Franchisor acknowledge will be determined by an arbitrator and not a court, unless the arbitrator invalidates the Arbitration provision in its entirety, in which case, wither party has the right to appeal such invalidation to a court of competent jurisdiction).
- Business Judgment.
The Parties recognize and any mediator, arbitrator and judge is affirmatively advised, that certain provisions of this Agreement reflect rights of Franchisor and Multi-Unit Developer and Controlled Entity (if any) 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 Multi-Unit Developer and Controlled Entity (if any), a mediator, arbitrator or judge shall not substitute his or her judgment for the judgment so exercised by Franchisor or Multi-Unit Developer and Controlled Entity (if any).
Source: Item 5 — and 7 of the FDD, Section 3.1 of the Franchise Agreement and Section 4.1 of the Multi-Unit Development Agreement are hereby amended to state that payment of the initial franchise fee and development fee will be deferred until We have satisfied Our pre-opening obligations, and You have commenced business operations. (FDD pages 168–290)
What This Means (2025 FDD)
Based on the 2025 Southern Steer Franchise Disclosure Document, the franchise agreement includes provisions addressing dispute resolution, but it does not explicitly state whether a clause designating jurisdiction and venue outside of Illinois is valid. The document outlines a definition of disputes, business judgment considerations, and modifications to the franchise agreement. It also mentions that only those portions of the arbitration clause necessary to comply with applicable law will be invalid and considered severable, with the remainder being enforced.
For a prospective Southern Steer franchisee in Illinois, this means that while the agreement likely contains clauses about how and where disputes will be resolved, the FDD does not clarify if these clauses can force them to litigate or arbitrate outside of Illinois. The severability clause suggests that some provisions could be unenforceable if they conflict with local laws.
Therefore, it is important for a potential franchisee to seek legal counsel to review the franchise agreement and understand their rights under Illinois law. Specifically, they should ask the franchisor about the enforceability of venue selection clauses and whether they have the right to resolve disputes within Illinois, despite what the standard agreement might say. This due diligence will help ensure they are not signing away important legal protections.