What constitutes an 'Event of Default' that allows Southern Steer to assume the lease?
Southern_Steer Franchise · 2025 FDDAnswer from 2025 FDD Document
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, several events can trigger the franchisor's right to assume the franchisee's lease. These 'Events of Default' are tied to the franchisee's adherence to the franchise agreement and the operational status of the Southern Steer business. If such an event occurs, Southern Steer has the option, but not the obligation, to step in and take over the lease for the remaining term, maintaining the original terms and conditions, including rental costs. This is designed to protect Southern Steer's interests and ensure the continued operation of the franchise at that location.
Specifically, an 'Event of Default' will occur if the franchise agreement is terminated by either party for any reason, or if the franchisee wrongfully terminates the agreement. It also occurs if the franchisee ceases to operate the Southern Steer business at the franchised location, or if the franchise agreement expires and the franchisee is not granted a successor agreement. Furthermore, if the lease for the franchised location is terminated by either the landlord or the franchisee, or if the agreement expires and the franchisee fails to renew the lease, it constitutes an event of default.
This provision in the franchise agreement gives Southern Steer a safety net. By securing the lease, Southern Steer can ensure business continuity at the location by either finding a new franchisee or operating the location themselves. However, Southern Steer is not responsible for any past-due obligations of the franchisee under the lease. The franchisee also assigns their rights to the lease to Southern Steer as security, and authorizes Southern Steer to file a UCC-1 Financing Statement to record their security interest in the lease.