If a Controlled Entity executes the Franchise Agreement for any Southern Steer Business, who is responsible for the obligations under the Multi-Unit Development Agreement relating to compliance with the Franchise Agreement?
Southern_Steer Franchise · 2025 FDDAnswer from 2025 FDD Document
If the Multi-Unit Developer elects to have a Controlled Entity execute the Franchise Agreement for any Southern Steer Business being developed under this Agreement, then all terms, conditions and obligations under this Agreement relating to compliance with the Franchise Agreement for that Southern Steer Business will be the obligation of the Controlled Entity, and not the Multi-Unit Developer.
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 Controlled Entity executes the Franchise Agreement for a Southern Steer Business, the Controlled Entity, and not the Multi-Unit Developer, assumes responsibility for all obligations under the Multi-Unit Development Agreement related to compliance with that Franchise Agreement. This means the Controlled Entity is directly accountable for fulfilling the terms and conditions outlined in the Franchise Agreement for that specific Southern Steer location. However, the Multi-Unit Developer must still maintain at least a 51% ownership interest in the Controlled Entity during the term of the agreement.
This arrangement has significant implications for both the Multi-Unit Developer and the Controlled Entity. The Multi-Unit Developer retains overall responsibility for the broader development agreement but delegates the day-to-day compliance with the Franchise Agreement to the Controlled Entity. This can be beneficial if the Controlled Entity has specific expertise or resources relevant to operating the Southern Steer Business.
However, it's crucial to understand that the Multi-Unit Developer's ownership stake ensures they remain invested in the success of the Controlled Entity and the Southern Steer Business. Furthermore, all Owners of the Controlled Entity are subject to Southern Steer's approval and must meet their criteria for franchisees. This ensures that individuals managing and operating the Southern Steer Business under the Controlled Entity are qualified and aligned with Southern Steer's standards.
Prospective franchisees should carefully evaluate the structure of the Multi-Unit Development Agreement and the relationship between the Multi-Unit Developer and any Controlled Entities. Understanding the specific responsibilities and obligations of each party is essential for ensuring smooth operations and compliance with the terms of the franchise agreement.