What happens if a Southern Steer franchisee violates the in-term covenant not to compete?
Southern_Steer Franchise · 2025 FDDAnswer from 2025 FDD Document
- (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.
Source: Item 22 — ITEM. 22 CONTRACTS (FDD pages 61–168)
What This Means (2025 FDD)
According to Southern Steer's 2025 Franchise Disclosure Document, if a franchisee violates the in-term covenant not to compete, it is considered an unfair method of competition. The FDD states that such a violation would hinder the franchisee's ability to devote sufficient time to the Southern Steer business. This suggests that Southern Steer views the franchisee's commitment to the brand as essential for success.
Southern Steer requires that during the initial term and any interim period, the franchisee and related parties agree not to engage in competitive activities unless expressly authorized in writing by the franchisor. This restriction aims to protect the Southern Steer System, confidential information, trade secrets, brand manual, proprietary materials, and other confidential elements of the Southern Steer business. The franchisor believes that an exchange of ideas with the franchisee would be compromised if the franchisee held competitive interests.
While the FDD excerpt specifies that violating the in-term covenant not to compete is a breach of the agreement, it does not explicitly detail the specific penalties or remedies Southern Steer might pursue. A prospective franchisee should inquire with the franchisor about the specific consequences of violating this covenant, such as potential termination of the franchise agreement, monetary damages, or legal injunctions. Understanding the full ramifications of non-compliance is crucial before entering into a franchise agreement with Southern Steer.