Under what circumstances is a Southern Steer franchisee prohibited from transferring or subcontracting their obligations?
Southern_Steer Franchise · 2025 FDDAnswer from 2025 FDD Document
- (e) Management.
Franchisee is prohibited from transferring, delegating, assigning or subcontracting Franchisee's obligations under this Agreement or the operation of Franchisee's Southern Steer Business to any third party or entity without Franchisor's prior approval.
- 18.4.
Transfer of Agreement to Entity Owned by Original Signatories.
If the Franchisee is an individual, this Agreement may be Transferred by the Franchisee to an Entity that is wholly owned by Franchisee without the payment of a Transfer Fee and without complying with Section 19 if the Franchisee is an individual or a general partnership, provided that the Owner or Owners of the Entity are the same person or persons who signed this Agreement and such Transfer will not result in a change in control of the Southern Steer Business, so long as the Franchisee provides the Franchisor with prior written notice of such Transfer and the Franchisee is not in default of any of its obligations under this Agreement.
- 18.7.
Prohibition on Transfer to Competitor by the Franchisee and Owners.
The Franchisee and the Owners will not Transfer this Agreement or their Ownership Interests in the Franchisee, the Franchise Agreement or the Southern Steer Business to any person or Entity that owns, operates, franchises, develops, consults with, manages, is involved in, or controls any Competitive Business.
If the Franchisor refuses to permit a Transfer of this Agreement under this provision, then the only remedy of the Franchisee and the Owners will be to have an arbitrator determine whether the proposed transferee owns or operates a Competitive Business.
The Franchisee acknowledges and agrees that the Franchisee will be solely responsible for all costs and fees charged by such arbitrator.
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 generally prohibited from transferring, delegating, assigning, or subcontracting their obligations under the Franchise Agreement or the operation of their Southern Steer Business to any third party or entity without the prior approval of Southern Steer.
This restriction ensures that Southern Steer maintains control over who operates a franchise and upholds brand standards. It prevents a franchisee from simply handing over their responsibilities to someone else without the franchisor's consent. This is a common clause in franchise agreements, as franchisors want to ensure that anyone operating a franchise meets their qualifications and standards.
However, the FDD also states that if the franchisee is an individual, the agreement may be transferred to an entity wholly owned by the franchisee without a transfer fee or needing to comply with Section 19, provided certain conditions are met. These conditions include that the owners of the entity are the same people who signed the agreement, the transfer does not result in a change in control of the Southern Steer Business, and the franchisee provides prior written notice to Southern Steer and is not in default of any obligations under the agreement.
Additionally, the franchisee and owners are prohibited from transferring the agreement or their ownership interests to any person or entity that owns, operates, franchises, develops, consults with, manages, is involved in, or controls any Competitive Business. If Southern Steer refuses a transfer under this provision, the franchisee's only remedy is to have an arbitrator determine whether the proposed transferee owns or operates a Competitive Business, with the franchisee responsible for all arbitration costs and fees.