Are there any exceptions to the negotiation, mediation, and arbitration requirements for dispute resolution between Southern Steer and the Multi-Unit Developer?
Southern_Steer Franchise · 2025 FDDAnswer from 2025 FDD Document
Only those portions of the arbitration clause with respect to such claim or claims as are necessary to comply with applicable law will be invalid and considered severable, but the remainder will be enforced.
- Definition of Dispute.
Subject to Section 14.4, "Dispute" means any disputes, controversies or claims between Franchisor, its Affiliate, shareholders, owners, officers, directors, agents, employees and attorneys (in their respective capacity) and Multi-Unit Developer and Controlled Entity (if any) and Multi-Unit Developer and Controlled Entity (if any)'s Operating Principal, Owners, Guarantors, Designated Manager(s), affiliates, officers, directors, agents and employees (collectively, "Parties") (a) arising out of or related to this Agreement or any other agreement between the Parties relating to the Southern Steer Business or the relationship of the Parties hereto; (b) the relationship of the Parties hereto; (c) the Multi-Unit Developer or Controlled Entity's development of Southern Steer Businesses; (d) the scope or validity of this Agreement or any other agreement between the Parties relating to the Southern Steer Business or the relationship of the Parties hereto or any provision thereof (including the validity and scope of the arbitration obligation, which Multi-Unit Developer and Controlled Entity (if any) and Franchisor acknowledge will be determined by an arbitrator and not a court, unless the arbitrator invalidates the Arbitration provision in its entirety, in which case, wither party has the right to appeal such invalidation to a court of competent jurisdiction).
- Business Judgment.
The Parties recognize and any mediator, arbitrator and judge is affirmatively advised, that certain provisions of this Agreement reflect rights of Franchisor and Multi-Unit Developer and Controlled Entity (if any) to take (or refrain from taking) certain actions in exercise of its business judgment based on its assessment of the long term interests of the franchised system as a whole.
Where such discretion has been exercised and is supported by the business judgment of Franchisor or Multi-Unit Developer and Controlled Entity (if any), a mediator, arbitrator or judge shall not substitute his or her judgment for the judgment so exercised by Franchisor or Multi-Unit Developer and Controlled Entity (if any).
Source: Item 5 — and 7 of the FDD, Section 3.1 of the Franchise Agreement and Section 4.1 of the Multi-Unit Development Agreement are hereby amended to state that payment of the initial franchise fee and development fee will be deferred until We have satisfied Our pre-opening obligations, and You have commenced business operations. (FDD pages 168–290)
What This Means (2025 FDD)
According to the 2025 Southern Steer Franchise Disclosure Document, there are limited exceptions to the arbitration requirements for dispute resolution. The document states that only those portions of the arbitration clause necessary to comply with applicable law will be considered invalid and severable, while the remainder of the clause will still be enforced. This means that Southern Steer aims to maintain arbitration as the primary method of dispute resolution to the fullest extent legally possible.
The FDD defines "Dispute" broadly, encompassing any controversies or claims between Southern Steer and the Multi-Unit Developer arising from the agreement, the relationship between the parties, the development of Southern Steer Businesses, or the validity and scope of the agreement, including the arbitration obligation itself. The document specifies that an arbitrator, rather than a court, will determine the validity and scope of the arbitration provision, unless the arbitrator invalidates the entire provision, in which case either party can appeal to a court.
Southern Steer emphasizes the importance of business judgment in the agreement, advising mediators, arbitrators, and judges not to substitute their judgment for the business judgment exercised by either Southern Steer or the Multi-Unit Developer. This suggests that Southern Steer seeks to protect its strategic decisions from being second-guessed in dispute resolution processes. Prospective franchisees should be aware that while arbitration is generally required, certain legal limitations and considerations of business judgment may influence the resolution of disputes.