What conditions must a publicly-held company meet for the ownership of its shares to be exempt from the competitive business restrictions in the Southern Steer franchise agreement?
Southern_Steer Franchise · 2025 FDDAnswer from 2025 FDD Document
- 18.7.
Prohibition on Transfer to Competitor by the Franchisee and Owners.
The Franchisee and the Owners will not Transfer this Agreement or their Ownership Interests in the Franchisee, the Franchise Agreement or the Southern Steer Business to any person or Entity that owns, operates, franchises, develops, consults with, manages, is involved in, or controls any Competitive Business.
If the Franchisor refuses to permit a Transfer of this Agreement under this provision, then the only remedy of the Franchisee and the Owners will be to have an arbitrator determine whether the proposed transferee owns or operates a Competitive Business.
The Franchisee acknowledges and agrees that the Franchisee will be solely responsible for all costs and fees charged by such arbitrator.
Source: Item 22 — ITEM. 22 CONTRACTS (FDD pages 61–168)
What This Means (2025 FDD)
Based on the 2025 Southern Steer Franchise Disclosure Document, the document does not provide specific conditions under which a publicly-held company's ownership of shares would be exempt from competitive business restrictions. The FDD does outline general restrictions on transferring ownership interests to entities involved in competitive businesses.
Specifically, the FDD states that neither the franchisee nor the owners can transfer the Franchise Agreement or their ownership interests to any entity that owns, operates, franchises, develops, consults with, manages, is involved in, or controls any competitive business. If Southern Steer refuses a transfer based on this provision, the franchisee's only recourse is to have an arbitrator determine whether the proposed transferee owns or operates a competitive business, with the franchisee responsible for all arbitration costs.
Since the FDD does not provide specific exemptions for publicly-held companies, it is important for a prospective franchisee to seek clarification from Southern Steer regarding the application of these restrictions in the context of publicly-held entities. Understanding how these restrictions would apply to different ownership structures is crucial for making an informed investment decision.