Does Southern Steer have an obligation to assume the lease if an Event of Default occurs?
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, Southern Steer does not have an obligation to assume the lease if an Event of Default occurs. The franchisee assigns their rights to the lease to Southern Steer as security. If an Event of Default occurs, Southern Steer has the right and option, but not the obligation, to assume the lease for the remaining term under the same conditions as the original lease.
An Event of Default includes situations such as the termination of the Franchise Agreement by either party, the franchisee ceasing business at the franchised location, the agreement expiring without renewal, or the lease being terminated by either the landlord or the franchisee. This right is at Southern Steer's sole election, and they bear no responsibility for the franchisee's past-due obligations under the lease.
This clause protects Southern Steer by giving them the option to take over a potentially valuable lease without being forced to do so. For a prospective franchisee, this means that in the event of a default, they cannot rely on Southern Steer to assume the lease and cover any outstanding debts. The franchisee remains responsible for their lease obligations unless Southern Steer chooses to exercise its option to take over the lease.
The FDD also states that if the franchisee defaults, the franchisor has the right, but not the obligation, to cure the default. The franchisor has an additional 15 days from the expiration of the franchisee's cure period to exercise the option to cure the default and take an automatic assignment of the franchisee's interest. This further emphasizes that Southern Steer's involvement in the lease is optional and designed to protect their interests, not to guarantee the franchisee's lease obligations.