Under what conditions can Southern Steer require the Franchisee to obtain an economic feasibility study?
Southern_Steer Franchise · 2025 FDDAnswer from 2025 FDD Document
The Franchisee will provide to the Franchisor the information specified by the Franchisor in writing for the proposed site ("Site Information").
The Franchisor will have the right to require that the Franchisee obtain, at the Franchisee's expense, an economic feasibility study for the proposed site for the Franchised Location.
Any such feasibility study required by the Franchisor will be completed by an expert mutually agreed upon by the Franchisor and the Franchisee in writing.
The Franchisor will review the Site Information and the Franchisee will not purchase or lease a proposed site until the Franchisee has provided the Site Information to the Franchisor, the Franchisor has reviewed the Site Information, and the Franchisor has provided the Franchisee with a no-objection letter for the proposed site.
The review of any Site Information, any visits by the Franchisor to a proposed site, the review of the site, and/or the issuance of a no-objection letter by the Franchisor will not constitute a warranty or representation by the Franchisor or any other party that the site for the Franchised Location chosen by the Franchisee will be a financial or operational success.
The issuance of a no-objection letter by the Franchisor will only mean that it has received the Site Information provided by the Franchisee and reviewed the Site Information.
Source: Item 22 — ITEM. 22 CONTRACTS (FDD pages 61–168)
What This Means (2025 FDD)
According to Southern Steer's 2025 Franchise Disclosure Document, the franchisee is responsible for selecting the site for their Southern Steer business. As part of the site selection process, Southern Steer requires the franchisee to provide specific information about the proposed site, referred to as "Site Information." Southern Steer has the right to demand that the franchisee, at their own expense, obtain an economic feasibility study for the proposed location. This study must be conducted by an expert agreed upon in writing by both Southern Steer and the franchisee.
Before a franchisee can finalize the purchase or lease of a site, they must first submit the required Site Information to Southern Steer for review. Southern Steer will then issue a no-objection letter if the site is deemed suitable. However, the document clarifies that Southern Steer's review and no-objection letter do not guarantee the financial or operational success of the chosen location. The no-objection letter simply indicates that Southern Steer has received and reviewed the provided Site Information.
This process highlights the importance of thorough due diligence when selecting a location for a Southern Steer franchise. While Southern Steer reserves the right to request an economic feasibility study, the ultimate responsibility for the site's success rests with the franchisee. Prospective franchisees should carefully consider the costs associated with obtaining such a study and factor that into their overall investment decision. It is also advisable to consult with experienced professionals, such as attorneys and real estate advisors, to assess the suitability of a potential site.