Can a Southern Steer franchisee own stock in a company that competes with Southern Steer?
Southern_Steer Franchise · 2025 FDDAnswer from 2025 FDD Document
- vii.
Divert or attempt to divert, directly or indirectly, any business related to, or any customer or account of, Franchisee's Southern Steer Business, Franchisor, Affiliates, any Other Business operated by Franchisor its franchisees, licensees or Affiliates, or any other business then being offered or operated by Franchisor or its Affiliate(s) in the Protected Area.
- (b) In-Term Covenant Not to Compete.
Franchisee acknowledges that Franchisor will be unable to protect the System, Confidential Information, Trade Secrets, Brand Manual, Franchisor's proprietary materials and other confidential and proprietary elements of the Southern Steer Business and achieve an exchange of ideas with Franchisee if Franchisee or those persons referenced in Section16.3 were permitted to hold competitive interests or engage in Competitive Activities.
Therefore, during the Initial Term and any Interim Period, Franchisee and those persons referred to in Section 16.3 agree not to, directly or indirectly, engage in Competitive Activities anywhere other than as expressly authorized in writing by Franchisor.
Franchise acknowledges that a violation of this Section 16.2(b) would constitute an unfair method of competition and would hinder Franchisee's ability to devote sufficient time to the Southern Steer Business.
- (c) Post Term Covenant Not to Compete.
For a period of 24 months after the later of (1) the termination, transfer, assignment or expiration of this Agreement; or (2) the entry of a final order by an arbitrator or a court of competent jurisdiction enforcing this covenant, Franchisee and those persons identified in Section 16.3 will not engage in any Competitive Activity within:
i. the Franchised Location;
ii. the Protected Area;
iii. within 50 miles of the outer boundaries of the Protected Area;
iv. within 50 miles from the Franchised Location;
v. within 50 miles of any other Southern Steer Business, or
Source: Item 22 — ITEM. 22 CONTRACTS (FDD pages 61–168)
What This Means (2025 FDD)
According to the 2025 Southern Steer Franchise Disclosure Document, a franchisee's ability to own stock in a company that competes with Southern Steer is restricted both during the term of the franchise agreement and for a period after the agreement ends.
During the Initial Term and any Interim Period, the franchisee and related parties are prohibited from engaging in Competitive Activities unless expressly authorized in writing by Southern Steer. Southern Steer states that allowing franchisees to hold competitive interests would hinder their ability to focus on the Southern Steer business and protect the System, Confidential Information, Trade Secrets, Brand Manual, and other proprietary elements.
For a period of 24 months after the termination, transfer, assignment, or expiration of the franchise agreement, the franchisee and related parties are restricted from engaging in any Competitive Activity within the Franchised Location, the Protected Area, within 50 miles of the outer boundaries of the Protected Area, within 50 miles from the Franchised Location, or within 50 miles of any other Southern Steer Business.
These restrictions are typical in franchise agreements to protect the brand and prevent franchisees from using proprietary information to compete, either directly or indirectly, with the franchisor or other franchisees. A prospective franchisee should carefully consider these limitations and how they might affect future business opportunities.