What is the purpose of the franchisee's lease assignment to Southern Steer?
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, the franchisee's assignment of the lease to Southern Steer acts as a security measure, ensuring the franchisee adheres to the franchise agreement's terms and conditions. If the franchisee defaults, Southern Steer has the option to assume the lease for the remaining term, maintaining the original terms, conditions, and rental rates. This assignment is further solidified by the franchisee's agreement to allow Southern Steer to file a UCC-1 Financing Statement, securing Southern Steer's interest in the lease.
An event of default, which triggers Southern Steer's right to assume the lease, includes scenarios such as the termination of the franchise agreement by either party, the franchisee wrongfully terminating the agreement, the franchisee ceasing business operations at the franchised location, the expiration of the agreement without renewal, or the termination of the lease itself. This provision ensures Southern Steer can maintain control over the location and continue operations, minimizing disruption to the brand. However, Southern Steer is not obligated to assume the lease or responsible for the franchisee's past-due obligations.
Furthermore, the landlord consents to this arrangement, agreeing to accept Southern Steer's performance in lieu of the franchisee's, provided Southern Steer is given the opportunity to address any defaults. The landlord also acknowledges the validity and enforceability of the lease, confirming no prior assignments or defaults exist. This setup protects Southern Steer's interests by allowing them to seamlessly continue operations at the location if the franchisee fails to meet their obligations, while also ensuring the landlord receives consistent lease payments. This is a fairly common practice in franchising, as it protects the brand's location and continuity of operations.