What happens if a Southern Steer Multi-Unit Developer is determined to be insolvent or files for bankruptcy?
Southern_Steer Franchise · 2025 FDDAnswer from 2025 FDD Document
- (d) the Multi-Unit Developer, its Owners, Operating Principal, Guarantors or any Controlled Entity is determined to be insolvent within the meaning of applicable state or federal law, any involuntary petition for bankruptcy is filed against the Multi-Unit Developer and the Multi-Unit Developer is unable, within a period of 60 days from such filing, to obtain the dismissal of the involuntary petition, or the Multi-Unit Developer files for bankruptcy or is adjudicated a bankrupt under applicable state or federal law;
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 Multi-Unit Developer, its Owners, Operating Principal, Guarantors or any Controlled Entity is determined to be insolvent under applicable state or federal law, or if any involuntary petition for bankruptcy is filed against them and they cannot dismiss it within 60 days, or if they file for bankruptcy or are adjudicated bankrupt under applicable state or federal law, it constitutes an event of default under the Multi-Unit Development Agreement.
This has significant implications for a prospective Southern Steer franchisee. Insolvency or bankruptcy can trigger the termination of the Multi-Unit Development Agreement. This means the developer could lose the rights to open additional Southern Steer businesses in the Development Territory. However, the existing individual Franchise Agreements for Southern Steer Businesses that are already open and operating in the Development Territory prior to the termination remain in effect.
Upon termination, all rights to open and operate additional Southern Steer Businesses in the Development Territory revert back to Southern Steer. The Multi-Unit Developer must continue to meet its obligations under existing Franchise Agreements for operating locations. Southern Steer retains the right to develop additional Southern Steer Businesses in the territory either independently or through other parties. The Multi-Unit Developer is not entitled to a refund of any fees paid to Southern Steer. The indemnities and covenants within the agreement remain in effect even after termination.