What happens to the franchisee's rights in the lease if the Southern Steer franchise agreement is terminated?
Southern_Steer Franchise · 2025 FDDAnswer from 2025 FDD Document
sponsible for the acts of its employees, agents and independent contractors, and will take all reasonable actions necessary to ensure that its employees, agents and independent contractors comply with all federal, state and local laws, rules and regulations including, but not limited to, all discrimination laws, sexual harassment laws and laws relating to the disabled. The Franchisor will not have any right, obligation or responsibility to control, supervise or manage the Franchisee's employees, agents or independent contractors, and will no way be involved in the day-to-day operations of the Franchisee's Southern Steer Business.
26. LEASE AS SECURITY; TERMINATION OF LEASE
26.1. Franchisee's Assignment of the Lease. The Franchisee hereby assigns all of its right, title and interest in and to the Lease (which is incorporated herein by reference) to the Franchisor as security for the Franchisee's performance of the terms and conditions of this Agreement. If an Event of Default occurs, then the Franchisor will have the right and option, but not the obligation, to take and assume the Lease for the remaining term of the Lease under the same terms and conditions, including rental, as originally contracted for by the Franchisee. The Franchisee authorizes the Franchisor to file a UCC-1 Financing Statement and agrees to execute such other documents as may be reasonably required by the Franchisor's attorneys to perfect and record the Franchisor's security interest in the Lease. An "Event of Default," for the purposes of this Section, will occur if:
- (a) this Agreement is terminated by either the Franchisor or the Franchisee for any reason whatsoever;
- (b) the Franchisee wrongfully terminates this Agreement;
- (c) the Franchisee at any time ceases to do business at the Franchised Location as a Southern Steer Business;
- (d) this Agreement expires and the Franchisee is not granted the right to enter into a Successor Franchise Agreement as provided for in Section 2.2;
- (e) the Lease for the Franchised Location is terminated by either the Landlord or the Franchisee for any reason whatever; or
- (f) this Agreement expires and the Franchisee fails to renew the Lease pursuant to any provisions relating to a Successor Term.
This right granted by the Franchisee to the Franchisor to assume the Franchisee's position as the tenant under the Lease will be at the Franchisor's sole election, and the Franchisor will bear no responsibility for any of the Franchisee's past-due obligations under the Lease.
- 26.2. Perfected Assignment; Notice. This assignment will constitute a perfected, absolute and present assignment; provided, however, the Franchisor will have no right under this assignment to enforce the provisions of the Lease until an Event of Default has occurred.
Source: Item 22 — ITEM. 22 CONTRACTS (FDD pages 61–168)
What This Means (2025 FDD)
According to Southern Steer's 2025 Franchise Disclosure Document, the franchisee assigns their rights, title, and interest in the lease to Southern Steer as security for their performance under the franchise agreement. If an Event of Default occurs, Southern Steer has the option to take over the lease for the remaining term under the same conditions, including rental costs, as originally agreed upon by the franchisee. Southern Steer is not obligated to assume the lease and bears no responsibility for the franchisee's past-due obligations. An Event of Default includes the termination of the agreement by either party for any reason.
Southern Steer is granted the right to assume the franchisee's position as the tenant, but this is at Southern Steer's sole election. The franchisee must also execute a Collateral Assignment of Lease, assigning their rights in the lease to Southern Steer upon termination or expiration of the franchise agreement or a default under the lease. This ensures that Southern Steer has the option to maintain control of the location, which is crucial for business continuity or re-franchising.
Upon termination or expiration of either the lease or the franchise agreement, the lessor will cooperate with Southern Steer to secure possession of the premises. If Southern Steer does not elect to take an assignment of the lessee's interest, the lessor will allow Southern Steer to enter the premises to remove signs and other items identifying the premises as a Southern Steer franchise and make modifications to protect the "Southern Steer Butcher" marks and system. This protects Southern Steer's brand and prevents confusion after a franchise ceases operation.