What is the Collateral Assignment of Lease for a Southern Steer franchise, and where is it attached?
Southern_Steer Franchise · 2025 FDDAnswer from 2025 FDD Document
Lessee will have the right to assign or sublet all of its right, title and interest in the Lease, at any time during the term of the Lease, including any extensions or renewals thereof, without charge and without first obtaining Lessor's consent in accordance with the Collateral Assignment of Lease attached hereto as Attachment G-1: (a) to Franchisor or Franchisor's parent, subsidiary, or affiliate, (b) to a duly authorized franchisee of Franchisor, (c) in connection with a merger, acquisition, reorganization or consolidation, or (d) in connection with the sale of Lessee's corporate stock or assets.
Source: Item 22 — ITEM. 22 CONTRACTS (FDD pages 61–168)
What This Means (2025 FDD)
According to Southern Steer's 2025 Franchise Disclosure Document, the Collateral Assignment of Lease is a contract that allows Southern Steer Franchising International, LLC, as the 'Assignee', to take over the franchisee's ('Assignor') lease under certain conditions. This assignment serves as collateral, meaning it's a security measure for Southern Steer, ensuring the franchisee fulfills their obligations under the Franchise Agreement. Attachment G-1 is where the full Collateral Assignment of Lease agreement is located.
Specifically, the franchisee assigns their rights and interests in the lease to Southern Steer as security. This becomes relevant if the franchisee defaults on the Franchise Agreement or any related document. In such cases, Southern Steer has the right to take possession of the premises, effectively expelling the franchisee, who then loses any rights to the lease. The franchisee cannot surrender, terminate, amend, or modify the lease without Southern Steer's written consent. The franchisee must also exercise any lease renewal options at least 30 days before the deadline, unless Southern Steer instructs otherwise. If the franchisee fails to do so, Southern Steer is authorized to act on their behalf to renew the lease.
This arrangement protects Southern Steer's interests by ensuring continued operation of the franchise at the location, even if the original franchisee fails. For a prospective franchisee, this means understanding that their lease is not entirely under their control. Southern Steer has significant rights regarding the lease, including the ability to take it over in case of default. The franchisee must maintain the lease and its renewal options to avoid losing their rights and potentially the business location. The Landlord also agrees to allow Southern Steer to enter the premises to ensure any alterations are made per section 21.2 of the Franchise Agreement.