During the Initial Term of the Franchise Agreement for Southern Steer, can the franchisee be an employee of a Competitive Business without prior written consent from the Franchisor?
Southern_Steer Franchise · 2025 FDDAnswer from 2025 FDD Document
4. Covenant Not to Compete.
- (a) In-Term Covenant Not to Compete. During the Initial Term of the Franchise Agreement, any Interim Period and any Successor Term, neither the Franchisee or any of the Owners, or the Recipients will, on their own account or as an employee, principal, agent, franchisee, independent contractor, consultant, affiliate, licensee, partner, officer, director, shareholder, member, manager, or owner of any other person or Entity, directly or indirectly, own, operate, lease, franchise, conduct, engage in, be connected with, have any interest in, or assist any person or Entity engage in any Competitive Activity or Competitive Business, except with the prior written consent of the Franchisor, which consent may be withheld in Franchisor's sole discretion.
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, during the initial term of the Franchise Agreement, a franchisee cannot be an employee, principal, agent, franchisee, independent contractor, consultant, affiliate, licensee, partner, officer, director, shareholder, member, manager, or owner of any other person or entity that engages in any competitive activity or competitive business without prior written consent from Southern Steer. This consent can be withheld at Southern Steer's discretion. This restriction also applies to owners and recipients.
This clause ensures that franchisees, owners, and other involved parties are fully committed to the success of their Southern Steer franchise and do not divert resources or knowledge to competing businesses. It protects Southern Steer's market position and proprietary information. The term 'Competitive Activity or Competitive Business' would be defined elsewhere in the Franchise Agreement.
This non-compete provision is a standard practice in franchising to protect the franchisor's brand and business model. Prospective franchisees should carefully consider the scope and limitations of this covenant, as it could restrict their ability to engage in other business ventures during the term of the franchise agreement. Franchisees should seek legal counsel to fully understand the implications of this clause before signing the agreement.
It is important for potential franchisees to discuss with Southern Steer what specific activities or businesses would be considered 'Competitive' and under what circumstances the franchisor might grant consent to engage in such activities. Understanding these nuances can help a franchisee avoid potential conflicts and ensure compliance with the Franchise Agreement.