What is the meaning of 'due diligence' in the context of Southern Steer's option to purchase?
Southern_Steer Franchise · 2025 FDDAnswer from 2025 FDD Document
If the Franchisor provides the Franchisee with a Notice of Intent to Purchase within 30 days after receipt of the Franchisee's Offer, then the Franchisor will have 90 days after the date the Notice of Intent to Purchase is received by the Franchisee ("Notice Date") to conduct a "due diligence" review.
The Franchisee will promptly provide the Franchisor with all Financial Records and other information requested by the Franchisor or its representatives to conduct its due diligence review.
The Franchisor will have the absolute and unconditional right to terminate the Notice of Intent to Purchase and any obligation to purchase the Southern Steer Business or Major Assets from the Franchisee for any reason and at any time during the 90-day due diligence review period by giving the Franchisee written notice.
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 'due diligence' review period is triggered if Southern Steer provides the franchisee with a Notice of Intent to Purchase within 30 days after receiving the franchisee's offer to sell. Southern Steer then has 90 days from the date the franchisee receives the Notice of Intent to Purchase to conduct this review.
During this 90-day period, the franchisee is obligated to promptly provide Southern Steer with all Financial Records and other information requested by Southern Steer or its representatives. This allows Southern Steer to thoroughly investigate the financial and operational health of the franchise before committing to the purchase.
Importantly, Southern Steer retains the absolute right to terminate the Notice of Intent to Purchase at any time during the 90-day due diligence period, for any reason. This provides Southern Steer with a significant degree of flexibility and protection, as they can back out of the purchase if the due diligence review reveals any unexpected issues or concerns. After the due diligence period, both parties are expected to negotiate in good faith to finalize the purchase agreement within 120 days after the initial Notice Date.