What is the timeframe for dismissing an involuntary bankruptcy petition to avoid termination of the Southern Steer Multi-Unit Development Agreement?
Southern_Steer Franchise · 2025 FDDAnswer from 2025 FDD Document
- (d) the Multi-Unit Developer, its Owners, Operating Principal, Guarantors or any Controlled Entity is determined to be insolvent within the meaning of applicable state or federal law, any involuntary petition for bankruptcy is filed against the Multi-Unit Developer and the Multi-Unit Developer is unable, within a period of 60 days from such filing, to obtain the dismissal of the involuntary petition, or the Multi-Unit Developer files for bankruptcy or is adjudicated a bankrupt under applicable state or federal law;
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, if an involuntary petition for bankruptcy is filed against the Multi-Unit Developer, the developer has 60 days from the filing date to obtain a dismissal of the petition to avoid termination of the Multi-Unit Development Agreement.
This means that if a third party initiates bankruptcy proceedings against the Southern Steer franchisee, the franchisee must act quickly to resolve the situation. Failure to dismiss the petition within the specified timeframe could lead to the termination of the development agreement, which would impact the franchisee's rights to expand their Southern Steer business within the designated territory.
This clause protects Southern Steer from potential financial instability of its multi-unit developers. It is a fairly standard clause in franchise agreements, as franchisors need to ensure the financial viability of their franchisees to protect the brand and the overall network. Prospective franchisees should be aware of this requirement and ensure they have adequate financial resources and management practices in place to avoid such situations.