What is the Southern Steer franchisor's obligation regarding the deposit after it is paid?
Southern_Steer Franchise · 2025 FDDAnswer from 2025 FDD Document
| by | This Deposit Agreement ("Agreement") is made as of ("Effective Date") and between Southern Steer Franchising International, LLC ("Franchisor"), and ("you", "your", "I" or "my") whose principal business address is |
|---|---|
| RECITAL | |
| I understand that my application for the grant of a franchise to operate a Southern Steer | |
| Business in the general area of, which was submitted on, has | |
| been approved. | |
| I acknowledge that I am using funds for the Initial Franchise Fee from my 401K, IRA other | |
| qualified retirement account roll-over or third-party lender ("Funds"). The Funds will be available | |
| on or before | |
| To continue the process of obtaining a license to operate a Southern Steer Business, I am | |
| paying a Deposit toward the Initial Franchise Fee in accordance with this Agreement. | |
| In consideration of the foregoing and the covenants and consideration below, Franchisor | |
| and I agree as follows: | |
| AGREEMENT | |
| 1. | Deposit. Upon execution of this Agreement, I will pay Franchisor a deposit in the amount |
| of $29,750 ("Deposit"). The full Deposit will be applied to the Initial Franchise Fee. Upon | |
| execution of the Franchise Agreement, my Deposit will be immediately non-refundable. | |
| The Deposit will be deemed earned by Franchisor for processing of my Franchise | |
| Agreement and for services performed following the effective date of my Franchise | |
| Agreement. Franchisor's obligation with respect to my Deposit are those of a debtor and | |
| not a trustee. Franchisor may maintain my Deposit in a separate account or comingle my | |
| Deposit with general funds. Franchisor will not be required to pay me interest on my | |
| Deposit. | |
| 2. | Time for Signing Franchise Agreement. I acknowledge that I am required to sign the |
| Franchise Agreement at the time I sign this Deposit Agreement. I further acknowledge that | |
| I am required to pay the balance of the Initial Franchisee Fee in the amount of | |
| $ on the earlier of (a) receipt of my Funds; or (b) 30 days from | |
| the Effective Date of this Agreement ("Due Date"). |
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 Franchise Disclosure Document, the franchisor's obligation regarding the deposit is that of a debtor, not a trustee. This means Southern Steer is not required to hold the $29,750 deposit in a separate, protected account. Southern Steer can commingle the deposit with its general funds and is not obligated to pay the franchisee any interest on the deposit. The deposit is considered earned by Southern Steer for processing the Franchise Agreement and for services performed after the agreement's effective date.
Upon the execution of the Franchise Agreement, the deposit becomes immediately non-refundable. If the franchisee decides not to proceed with obtaining a license to operate a Southern Steer Business, the deposit will not be refunded. Additionally, the franchisee is required to sign the Franchise Agreement at the same time as the Deposit Agreement and pay the remaining balance of the Initial Franchise Fee by the earlier of receiving their funds or 30 days from the Deposit Agreement's effective date.
If the franchisee fails to pay the balance of the Initial Franchise Fee by the due date, Southern Steer has the right to terminate the Franchise Agreement. Southern Steer may extend the due date if the franchisee's receipt of funds is delayed by an additional 30 days, but is not required to do so. The franchisee acknowledges receiving the Franchise Disclosure Document at least 14 days before signing the Deposit Agreement, indicating they have had sufficient time to review the terms.
This arrangement carries risks for the prospective franchisee. Because the deposit is non-refundable once the Franchise Agreement is signed, and Southern Steer is not acting as a trustee, the franchisee could lose the $29,750 deposit even if they are unable to open the business due to unforeseen circumstances. It is important for potential franchisees to carefully consider their financial situation and ability to secure funding before signing the Deposit Agreement and Franchise Agreement.