What does the Collateral Assignment of Lease require the Southern Steer franchisee to do?
Southern_Steer Franchise · 2025 FDDAnswer from 2025 FDD Document
26. LEASE AS SECURITY; TERMINATION OF LEASE
26.1. Franchisee's Assignment of the Lease. The Franchisee hereby assigns all of its right, title and interest in and to the Lease (which is incorporated herein by reference) to the Franchisor as security for the Franchisee's performance of the terms and conditions of this Agreement. If an Event of Default occurs, then the Franchisor will have the right and option, but not the obligation, to take and assume the Lease for the remaining term of the Lease under the same terms and conditions, including rental, as originally contracted for by the Franchisee. The Franchisee authorizes the Franchisor to file a UCC-1 Financing Statement and agrees to execute such other documents as may be reasonably required by the Franchisor's attorneys to perfect and record the Franchisor's security interest in the Lease. An "Event of Default," for the purposes of this Section, will occur if:
- (a) this Agreement is terminated by either the Franchisor or the Franchisee for any reason whatsoever;
- (b) the Franchisee wrongfully terminates this Agreement;
- (c) the Franchisee at any time ceases to do business at the Franchised Location as a Southern Steer Business;
- (d) this Agreement expires and the Franchisee is not granted the right to enter into a Successor Franchise Agreement as provided for in Section 2.2;
- (e) the Lease for the Franchised Location is terminated by either the Landlord or the Franchisee for any reason whatever; or
- (f) this Agreement expires and the Franchisee fails to renew the Lease pursuant to any provisions relating to a Successor Term.
This right granted by the Franchisee to the Franchisor to assume the Franchisee's position as the tenant under the Lease will be at the Franchisor's sole election, and the Franchisor will bear no responsibility for any of the Franchisee's past-due obligations under the Lease.
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 franchisee is required to assign their rights, title, and interest in the lease to Southern Steer as security for their performance under the Franchise Agreement. This means that the franchisee is using the lease as collateral to ensure they meet their obligations to Southern Steer. If the franchisee defaults on the Franchise Agreement, Southern Steer has the option to take over the lease for the remaining term, under the same conditions and rental terms that the franchisee originally agreed to.
Southern Steer, as the franchisor, has the right, but not the obligation, to assume the lease if an Event of Default occurs. Events of Default include termination of the Franchise Agreement by either party, the franchisee wrongfully terminating the agreement, the franchisee ceasing business at the Franchised Location as a Southern Steer Business, the agreement expiring without a successor agreement, or the lease being terminated by either the landlord or the franchisee.
The franchisee authorizes Southern Steer to file a UCC-1 Financing Statement to record their security interest in the lease. However, Southern Steer is not responsible for any past-due obligations of the franchisee under the lease. This arrangement protects Southern Steer's interest in maintaining the location for a potential future franchisee or for their own operation if the original franchisee fails to meet their obligations.