After termination, can a Southern Steer franchisee operate a competitive business within any Protected Area granted by the Franchisor?
Southern_Steer Franchise · 2025 FDDAnswer from 2025 FDD Document
For a period of 24 months after the later of (1) the termination, transfer, assignment or expiration of this Agreement; or (2) the entry of a final order by an arbitrator or a court of competent jurisdiction enforcing this covenant, Franchisee and those persons identified in Section 16.3 will not engage in any Competitive Activity within:
i. the Franchised Location;
ii. the Protected Area;
iii. within 50 miles of the outer boundaries of the Protected Area;
iv. within 50 miles from the Franchised Location;
v. within 50 miles of any other Southern Steer Business, or
vi. within any Protected Area or territory granted by the Franchisor pursuant to an area development agreement, franchise agreement, license agreement or other territorial agreement.
16.3.
Parties Subject to Restrictions.
The restrictions set forth in this Section 16 apply to (a) Franchisee, its Owners and Operating Principal; (b) Designated Managers; (c) if Franchisee is an Entity, its managers, officers, members, directors, partners, shareholders, non-managing parties; (d) employees, agents and contractors who have access to the Confidential Information and/or Trade Secrets; and (e) Franchisee's Guarantors.
- 16.4.
Noncompetition and Nondisclosure Agreement.
Franchisee is required to obtain a signed Noncompetition and Nondisclosure Agreement in the forms attached as Attachment I from the parties described in this Section 16.3. Notwithstanding the foregoing, Franchisee's employees that qualifies as nonexempt under the Fair Labor Standards Act (FLSA) are not required to sign the Non-Competition and Non-Disclosure Agreement.
The Franchisee will be responsible for (a) ensuring that each person required to execute a Noncompetition and Nondisclosure Agreement does so; (b) enforcing such Nondisclosure and Noncompetition Agreements, and (c) paying for the legal fees, costs, and expenses associated with such
enforcement.
The Franchisor has the right to regulate the form of Nondisclosure and Noncompetition Agreement to be executed and to be a third-party beneficiary of or a party to such agreement with independent enforcement rights.
Source: Item 22 — ITEM. 22 CONTRACTS (FDD pages 61–168)
What This Means (2025 FDD)
According to the 2025 Southern Steer Franchise Disclosure Document, a franchisee is restricted from engaging in any competitive activity within their protected area for a period of 24 months after the termination, transfer, assignment, or expiration of the franchise agreement. This restriction also applies for 24 months after the entry of a final order by an arbitrator or court enforcing this covenant. These restrictions apply to the franchisee, their owners, operating principal, designated managers, and if the franchisee is an entity, its managers, officers, members, directors, partners, shareholders, and non-managing parties. It also applies to employees, agents, and contractors who have access to confidential information or trade secrets, as well as the franchisee's guarantors.
Specifically, the post-term non-compete clause prevents the franchisee and related parties from engaging in competitive activities within the franchised location, the protected area, within 50 miles of the outer boundaries of the protected area, within 50 miles from the franchised location, within 50 miles of any other Southern Steer Business, or within any protected area or territory granted by Southern Steer. This broad geographic scope means that a former franchisee's ability to start a competing business is significantly limited for two years following the end of the franchise agreement.
Southern Steer requires franchisees to obtain a signed Noncompetition and Nondisclosure Agreement from the parties described in Section 16.3, with the exception of employees that qualify as nonexempt under the Fair Labor Standards Act (FLSA). The franchisee is responsible for ensuring that these agreements are executed and enforced, and for covering the associated legal fees. Southern Steer retains the right to regulate the form of these agreements and to act as a third-party beneficiary with independent enforcement rights. This highlights the importance Southern Steer places on protecting its system, confidential information, and trade secrets, and the legal obligations franchisees must uphold in this regard.