What constitutes a material breach of the Southern Steer Multi-Unit Development Agreement regarding the representations, warranties, and covenants of the Multi-Unit Developer and the Owners?
Southern_Steer Franchise · 2025 FDDAnswer from 2025 FDD Document
- Authority. If the Multi-Unit Developer is an Entity, then the Multi-Unit Developer and the Owners represent, warrant and covenant that the execution of this Agreement and the consummation of the transactions contemplated by this Agreement are within the powers granted to the Multi-Unit Developer by the Organizational Documents and have been duly authorized and approved by the Multi-Unit Developer or by the board of directors, managing partner or other governing body of the Multi-Unit Developer.
- Working Capital. The Multi-Unit Developer will, at all times, maintain sufficient working capital to both operate the Southern Steer Businesses and to fulfill its development obligations under this Agreement.
- Ownership. If any person or Entity ceases to be one of the Multi-Unit Developer's or Controlled Entity's Owners, or if any individual or Entity becomes an Owner of the Multi-Unit Developer or Controlled Entity, then the Multi-Unit Developer or Controlled Entity will notify the Franchisor in writing and within five days the Multi-Unit Developer or Controlled Entity will require the new Owner to execute all documents required by the Franchisor.
- Continuing Obligation. The representations, warranties and covenants contained in this Article are continuing obligations of the Multi-Unit Developer and the Owners and that any failure to comply with such representations, warranties and covenants will constitute a material breach of this Agreement.
- Compliance with Agreement. The Multi-Unit Developer and the Owners represent, warrant and covenant that they will comply with all requirements and will perform all obligations in accordance with the terms and conditions of this Agreement.
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)
According to the 2025 Southern Steer FDD, several actions can constitute a material breach of the Multi-Unit Development Agreement concerning representations, warranties, and covenants of the Multi-Unit Developer and the Owners. These breaches relate to the developer's authority, working capital, ownership changes, and overall compliance with the agreement. Specifically, if the Multi-Unit Developer is an entity, it must have the authority to execute the agreement, and the execution must be duly authorized. The developer must also maintain sufficient working capital to operate the Southern Steer businesses and fulfill development obligations.
Changes in ownership of the Multi-Unit Developer or any controlled entity must be reported to Southern Steer in writing within five days, and new owners must execute all required documents. The representations, warranties, and covenants outlined in the agreement are ongoing obligations, and any failure to comply with them constitutes a material breach. Furthermore, the Multi-Unit Developer and the Owners must comply with all requirements and perform all obligations according to the terms and conditions of the agreement.
In practical terms, these stipulations mean that a Multi-Unit Developer must ensure their business is properly authorized and financially stable. They must also maintain open communication with Southern Steer regarding any changes in ownership. Failure to do so can result in a material breach of the agreement, potentially leading to termination of the development rights.
These requirements are fairly standard in multi-unit development agreements, as franchisors need to ensure that their developers are financially sound, properly authorized, and committed to the brand. Prospective Southern Steer multi-unit developers should carefully review these sections of the agreement to fully understand their obligations and avoid potential breaches.