What happens if a check issued by a Southern Steer Multi-Unit Developer is dishonored?
Southern_Steer Franchise · 2025 FDDAnswer from 2025 FDD Document
- (i) any check or EFT issued by the Multi-Unit Developer or Controlled Entity is dishonored because of insufficient funds (except where the check is dishonored because of bank error or an error in bookkeeping or accounting) or closed accounts more than three times during the Term of this Agreement;
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, if a check or EFT issued by a Multi-Unit Developer or their Controlled Entity is dishonored due to insufficient funds or closed accounts more than three times during the term of the agreement, it constitutes a breach of the agreement. However, this does not apply if the check is dishonored due to bank error or an error in bookkeeping or accounting.
This provision is important for prospective Multi-Unit Developers as it highlights the need to maintain sound financial practices and ensure sufficient funds are available to cover payments to Southern Steer. Multiple instances of dishonored checks can trigger serious consequences, potentially leading to termination of the Multi-Unit Development Agreement.
Franchisors typically include such clauses to protect their financial interests and ensure franchisees meet their financial obligations. The specific number of occurrences (three times in this case) provides a clear threshold before action is taken, offering some leeway for occasional errors while addressing chronic issues. It is crucial for franchisees to have robust accounting systems and practices in place to avoid such situations and maintain a good financial standing with the franchisor.