What constitutes a 'reasonable commercial dispute' regarding obligations to the Southern Steer Franchisor?
Southern_Steer Franchise · 2025 FDDAnswer from 2025 FDD Document
- Definition of Dispute.
Subject to Section 14.4, "Dispute" means any disputes, controversies or claims between Franchisor, its Affiliate, shareholders, owners, officers, directors, agents, employees and attorneys (in their respective capacity) and Multi-Unit Developer and Controlled Entity (if any) and Multi-Unit Developer and Controlled Entity (if any)'s Operating Principal, Owners, Guarantors, Designated Manager(s), affiliates, officers, directors, agents and employees (collectively, "Parties") (a) arising out of or related to this Agreement or any other agreement between the Parties relating to the Southern Steer Business or the relationship of the Parties hereto; (b) the relationship of the Parties hereto; (c) the Multi-Unit Developer or Controlled Entity's development of Southern Steer Businesses; (d) the scope or validity of this Agreement or any other agreement between the Parties relating to the Southern Steer Business or the relationship of the Parties hereto or any provision thereof (including the validity and scope of the arbitration obligation, which Multi-Unit Developer and Controlled Entity (if any) and Franchisor acknowledge will be determined by an arbitrator and not a court, unless the arbitrator invalidates the Arbitration provision in its entirety, in which case, wither party has the right to appeal such invalidation to a court of competent jurisdiction).
- Business Judgment.
The Parties recognize and any mediator, arbitrator and judge is affirmatively advised, that certain provisions of this Agreement reflect rights of Franchisor and Multi-Unit Developer and Controlled Entity (if any) to take (or refrain from taking) certain actions in exercise of its business judgment based on its assessment of the long term interests of the franchised system as a whole.
Where such discretion has been exercised and is supported by the business judgment of Franchisor or Multi-Unit Developer and Controlled Entity (if any), a mediator, arbitrator or judge shall not substitute his or her judgment for the judgment so exercised by Franchisor or Multi-Unit Developer and Controlled Entity (if any).
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)
Based on the 2025 Southern Steer Franchise Disclosure Document, a 'Dispute' is broadly defined as any disagreements, controversies, or claims between Southern Steer (including its affiliates, shareholders, owners, officers, directors, agents, employees, and attorneys) and the Multi-Unit Developer (including their Operating Principal, Owners, Guarantors, Designated Manager(s), affiliates, officers, directors, agents, and employees). These disputes can arise from various aspects of the relationship and agreements between the parties.
The definition encompasses disputes that arise out of or are related to the Franchise Agreement itself, any other agreements between the parties concerning the Southern Steer business, or the relationship between the parties. It also includes disputes related to the Multi-Unit Developer's development of Southern Steer Businesses and the scope or validity of any agreement or provision, including the arbitration obligation. The FDD specifies that the arbitrator, rather than a court, will determine the validity and scope of the arbitration provision, unless the arbitrator invalidates the entire provision, in which case either party can appeal to a court.
Southern Steer emphasizes the importance of business judgment in the agreement. The document advises that mediators, arbitrators, and judges should acknowledge that certain provisions reflect the rights of Southern Steer and the Multi-Unit Developer to make decisions based on their business judgment, considering the long-term interests of the franchise system. Therefore, if such discretion is exercised and supported by reasonable business judgment, a mediator, arbitrator, or judge should not substitute their own judgment for that of Southern Steer or the Multi-Unit Developer.
This broad definition of 'Dispute' and the emphasis on business judgment have significant implications for prospective franchisees. It means that nearly any disagreement can potentially escalate into a formal dispute, requiring mediation or arbitration. However, it also suggests that Southern Steer's decisions, if based on reasonable business grounds, are likely to be upheld in any dispute resolution process. Prospective franchisees should carefully consider this when evaluating the franchise opportunity and be prepared to engage in open communication and negotiation to resolve any potential disputes.