Does the Southern Steer Franchise Agreement contain provisions regarding termination, transfer, or non-renewal that might be superseded by California Business and Professions Code Sections 20000 through 20043?
Southern_Steer Franchise · 2025 FDDAnswer from 2025 FDD Document
California Business and Professions Code Sections 20000 through 20043 provide rights to you concerning termination, transfer or non-renewal of a franchise. If the Franchise Agreement contains a provision that is inconsistent with the law, the law will control.
The Franchise Agreement provides for termination upon bankruptcy. This provision may not be enforceable under federal bankruptcy law (11 U.S.C.A. Sec. 101 et seq.).
The Franchise Agreement and Multi-Unit Development Agreement contain a covenant not to compete which, in the case of the Franchise Agreement extends beyond the termination of the franchise. This provision may not be enforceable under California law.
The Franchise Agreement contains a liquidated damages clause. Under California Civil Code Section 1671, certain liquidated damages clauses are unenforceable.
The Franchise Agreement requires negotiation, non-binding mediation and binding arbitration in Clearwater, Florida, or at such other location as shall be mutually agreed upon by the parties in writing with the costs being borne equally between the parties, except that the parties each shall bear all of their own costs of negotiation, mediation and arbitration. Prospective franchisees are encouraged to consult private legal counsel to determine the applicability of California and federal laws (such as Business and Professions Code Section 20040.5, Code of Civil Procedure Section 1281 and the Federal Arbitration Act) to any provisions of a franchise agreement restricting venue to a forum outside the State of California. The Franchise Agreement and Multi-Unit Development Agreement requires application of the laws of Florida. This provision may not be enforceable under California law.
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 Southern Steer's 2025 Franchise Disclosure Document, the franchise agreement does contain provisions regarding termination, transfer, and non-renewal that may be superseded by California Business and Professions Code Sections 20000 through 20043. Specifically, the FDD states that if any provision in the Franchise Agreement is inconsistent with California law, the law will take precedence. This means that while the Southern Steer Franchise Agreement outlines the conditions for termination, transfer, and non-renewal, these provisions are subject to California law.
This disclosure is important for prospective franchisees in California because it clarifies that certain clauses in the agreement may not be fully enforceable in their state. For example, the Franchise Agreement provides for termination upon bankruptcy, but this provision may not be enforceable under federal bankruptcy law. Similarly, the agreement contains a covenant not to compete that extends beyond the termination of the franchise, which may not be enforceable under California law. The Franchise Agreement also contains a liquidated damages clause that may be unenforceable under California Civil Code Section 1671.
Furthermore, the Southern Steer Franchise Agreement requires negotiation, non-binding mediation, and binding arbitration in Clearwater, Florida, or another mutually agreed-upon location, with costs shared equally between the parties. However, the FDD encourages prospective franchisees to seek legal counsel to determine the applicability of California and federal laws to any provisions restricting venue to a forum outside California. The Franchise Agreement and Multi-Unit Development Agreement also require application of Florida laws, which may not be enforceable under California law.
In summary, while the Southern Steer Franchise Agreement sets forth the terms for termination, transfer, and non-renewal, California franchisees should be aware that California law will govern if any inconsistencies arise. It is highly recommended that prospective franchisees consult with legal counsel to understand their rights and obligations under both the Franchise Agreement and California law.