Must the Operating Principal of a Southern Steer franchise own an equity interest in the business?
Southern_Steer Franchise · 2025 FDDAnswer from 2025 FDD Document
You, Your Operating Principal (if You are a corporation, limited liability company, partnership, or other entity) or Your Designated Manager must, personally participate in the dayto-day management of Your Southern Steer Business. Your Designated Manager need not own an equity interest in the Southern Steer Business; however, your Operating Principal will own an equity interest. The Designated Manager must be approved by Us.
When the Franchisee signs this Agreement, the Franchisee will designate an individual as the "Operating Principal." If the Franchisee is an individual, then the Operating Principal will be the Franchisee. The Franchisee's Operating Principal must be an individual approved by the Franchisor who (a) owns and controls or has the right to own and control (subject to conditions reasonably acceptable to us) not less than 51% of the ownership equity in the Franchisee, and (b) has the authority to bind the Franchisee regarding all operational decisions with respect to Franchisee's Southern Steer Business. The Operating Principal will be required to execute the personal guaranty attached to this Agreement as Attachment C ("Personal Guaranty") and the Non-Competition and Non-Disclosure Agreement attached to this Agreement as Attachments J-1 and J-2.
Source: Item 15 — ITEM. 15 OBLIGATION TO PARTICIPATE IN THE ACTUAL OPERATION OF THE FRANCHISE BUSINESS (FDD pages 41–42)
What This Means (2025 FDD)
According to Southern Steer's 2025 Franchise Disclosure Document, if the franchisee is a corporation, limited liability company, partnership, or other entity, the Operating Principal must own an equity interest in the Southern Steer business. However, a Designated Manager does not need to have an equity interest. The Designated Manager must be approved by Southern Steer.
The FDD specifies that the Operating Principal must be an individual approved by Southern Steer who owns and controls, or has the right to own and control, at least 51% of the ownership equity in the franchisee. This individual must also have the authority to make all operational decisions for the Southern Steer business. The Operating Principal is required to execute a personal guaranty and a Non-Competition and Non-Disclosure Agreement.
This requirement ensures that the person in charge of the Southern Steer franchise has a significant stake in the business's success and is fully committed to its operation. It also gives Southern Steer some control over who is managing the franchise, as they must approve the Operating Principal. The Designated Manager, who handles the day-to-day operations, does not need to have an ownership stake, providing some flexibility in staffing and management structure.
Prospective franchisees should carefully consider this requirement, especially if they plan to structure their business as an entity. They need to ensure that the Operating Principal meets the ownership and control criteria set by Southern Steer and is willing to sign the required agreements. This also means that the Operating Principal will be personally liable for certain obligations of the franchisee under the Franchise Agreement.