Who is included in the term 'Controlled Entity' regarding obligations and liabilities related to the Southern Steer franchise?
Southern_Steer Franchise · 2025 FDDAnswer from 2025 FDD Document
or and the Multi-Unit Developer agree, and contract as follows:
1. DEFINITIONS
For purposes of this Agreement, the following words will have the following definitions:
- Controlled Entity. "Controlled Entity" will mean an Entity in which (a) the Multi-Unit Developer is the Owner of at least 51% of the Ownership Interests in the Entity; or (b) the Multi-Unit Developer 's Owners are the Owners of at least 51% of the Ownership Interests in the Entity.
- Franchise Agreement. "Franchise Agreement" will mean the Franchisor's thencurrent standard Franchise Agreement.
- Terms Defined in Franchise Agreement. Capitalized terms used but not defined in this Agreement will, if defined in the Franchise Agreement, have the meanings ascribed to such terms in the Franchise Agreement.
2. GRANT OF DEVELOPMENT RIGHTS; DEVELOPMENT TERRITORY.
Development Territory. The Franchisor hereby grants to the Multi-Unit Developer, for the Term of this Agreement, the right to enter into Franchise Agreements with the Franchisor for the development and operation of Southern Steer Businesses in accordance with the development schedule set out in Attachment A ("Development Schedule") within the geographical area
- ("Development Territory") set out in Attachment A. This Agreement will not constitute the sale of a Franchise to the Multi-Unit Developer but rather will give the Multi-Unit Developer the right and obligation to enter into Franchise Agreements with the Franchisor to own and operate franchised Southern Steer Businesses in the Development Territory.
- Non-Exclusive. The Franchisee acknowledges that the rights granted in this Agreement are non-exclusive. However, so long as Franchisee is not in default of this Agreement, the Franchise Agreement for Multi-Unit Developer's first Southern Steer Business ("Initial Franchise Agreement") or any other agreement between Multi-Unit Developer and Franchisor, Franchisor will not operate or license a third party to operate a Southern Steer Business in the Development Territory for the First Period set out in the Development Schedule attached hereto as Attachment A. Upon expiration of the First Period, Franchisor has the right to operate and license third parties to operate Southern Steer Businesses in the Development Territory.
- Reservation of Rights. Notwithstanding Section 2.2, the Franchisor and its Affiliates will have the absolute right to:
- (a) Subject to the terms and conditions of the Franchise Agreements between Franchisor and Multi-Unit Agreement regarding the Protected Area defined therein, to use, and license the use of, the System or component(s) thereof, for the operation of Southern Steer Businesses inside or outside the Development Area, regardless of proximity to the Development Area;
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, a 'Controlled Entity' refers to a business entity where either the Multi-Unit Developer owns at least 51% of the ownership interests, or the Multi-Unit Developer's owners collectively own at least 51% of the ownership interests. This definition is crucial for understanding who bears the responsibilities and liabilities associated with operating a Southern Steer franchise under a Multi-Unit Development Agreement.
If a Multi-Unit Developer chooses to have a Controlled Entity execute the Franchise Agreement, that entity assumes the obligations related to compliance with the Franchise Agreement for the specific Southern Steer business. However, the Multi-Unit Developer is not entirely relieved of their obligations. They must maintain at least a 51% ownership interest in the Controlled Entity throughout the term of the agreement. This ensures the Multi-Unit Developer retains significant control and investment in the franchise operations.
Furthermore, the FDD stipulates that both the Multi-Unit Developer and any Controlled Entity acknowledge the business risks involved and confirm they've conducted their own independent investigation. They also acknowledge that the success of the Southern Steer business depends largely on their personal efforts and prevailing economic conditions. This acknowledgement underscores that Southern Steer does not guarantee financial success and that franchisees must be prepared to actively manage their business to thrive.
Southern Steer also requires that all owners of the Controlled Entity are subject to the Franchisor's prior approval and must meet the Franchisor's criteria for franchisees. This provision allows Southern Steer to maintain standards across all franchise locations, even those operated through Controlled Entities, and ensures that all individuals involved in the ownership and operation of a Southern Steer franchise meet their requirements.