For a Southern Steer franchise in Maryland, what specific laws are referenced regarding the unenforceability of termination upon bankruptcy?
Southern_Steer Franchise · 2025 FDDAnswer from 2025 FDD Document
- (d) the Multi-Unit Developer, its Owners, Operating Principal, Guarantors or any Controlled Entity is determined to be insolvent within the meaning of applicable state or federal law, any involuntary petition for bankruptcy is filed against the Multi-Unit Developer and the Multi-Unit Developer is unable, within a period of 60 days from such filing, to obtain the dismissal of the involuntary petition, or the Multi-Unit Developer files for bankruptcy or is adjudicated a bankrupt under applicable state or federal 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)
Based on the 2025 Southern Steer Franchise Disclosure Document, the document does not specifically cite any Maryland state laws that would prevent the termination of the franchise agreement due to bankruptcy. However, the FDD does address the general conditions under which the agreement can be terminated if the franchisee declares bankruptcy.
Specifically, the agreement can be terminated if the Multi-Unit Developer, its Owners, Operating Principal, Guarantors, or any Controlled Entity is determined to be insolvent under applicable state or federal law. Termination can also occur if an involuntary bankruptcy petition is filed against the Multi-Unit Developer, and they cannot dismiss it within 60 days, or if the Multi-Unit Developer files for bankruptcy or is adjudicated bankrupt under state or federal law. These conditions allow Southern Steer to terminate the agreement if the franchisee's financial instability poses a risk to the franchise system.
It is important to note that the franchise agreement is governed by Florida law unless applicable state law specifically provides to the contrary. Therefore, a prospective franchisee in Maryland should consult with legal counsel to understand how Maryland's bankruptcy laws might interact with the terms of the Southern Steer franchise agreement and what specific protections or limitations Maryland law might provide in the event of bankruptcy. This consultation would clarify the enforceability of the termination clauses within the franchise agreement under Maryland law.