If the lease is terminated by either the Landlord or the Franchisee, is that an Event of Default for Southern Steer?
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.
This right granted by the Franchisee to the Franchisor to assume the Franchisee's position as the tenant under the Lease will be at the Franchisor's sole election, and the Franchisor will bear no responsibility for any of the Franchisee's past-due obligations under the Lease.
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 lease by either the landlord or the franchisee constitutes an event of default under the franchise agreement. Specifically, if the lease for the franchised location is terminated by either party for any reason, it triggers the franchisor's rights and options as outlined in the agreement. This is designed to protect Southern Steer's interest in maintaining continuous operation and brand integrity at the location.
This provision allows Southern Steer to step in and assume the lease if an event of default occurs. This means Southern Steer has the option to take over the lease for the remaining term under the same conditions initially agreed upon by the franchisee. To secure this right, the franchisee assigns their rights to the lease to Southern Steer as collateral. Southern Steer may file a UCC-1 Financing Statement to record their security interest in the lease, ensuring they have the legal right to assume the lease if needed.
However, Southern Steer is not obligated to assume the lease or responsible for the franchisee's past-due obligations. This decision is at Southern Steer's sole discretion. If Southern Steer chooses not to assume the lease, they are allowed to enter the premises to remove any branding and make necessary modifications to distinguish it from a Southern Steer location, protecting their trademarks and system. This clause highlights the importance of maintaining a stable lease agreement and the potential consequences of its termination on the franchise agreement.