If the Southern Steer agreement is terminated, is that considered an Event of Default?
Southern_Steer Franchise · 2025 FDDAnswer from 2025 FDD Document
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.
Source: Item 22 — ITEM. 22 CONTRACTS (FDD pages 61–168)
What This Means (2025 FDD)
According to the 2025 Southern Steer Franchise Disclosure Document, the termination of the Franchise Agreement, whether by the franchisor or the franchisee, is considered an Event of Default under specific circumstances, particularly concerning the lease agreement for the franchised location.
Specifically, if the Franchise Agreement is terminated by either Southern Steer or the franchisee for any reason, it constitutes an Event of Default. This also applies if the franchisee wrongfully terminates the agreement or ceases business operations at the franchised location. Additionally, if the lease is terminated by either the landlord or the franchisee, it is considered an Event of Default.
These Events of Default trigger certain rights for Southern Steer, including the option to take over the lease for the remaining term under the same conditions and rental terms. This provision ensures that Southern Steer can maintain control over the location and continue operating a Southern Steer business there, if desired. The franchisee is required to assign the lease to Southern Steer as security for their performance under the Franchise Agreement, and Southern Steer has the right to file a UCC-1 Financing Statement to protect its interest in the lease.