Gold_Star 2025 Franchise FAQ - FDD Ninja

Question 1

What actions can Gold Star take if a franchisee defaults under the terms of the franchise agreement?

Accepted Answer

- **15.5 Right of Entry; Appointment of Receiver**. If FRANCHISEE is in default under the terms of this Agreement, in addition to the COMPANY's right to terminate this Agreement, and without limiting any other rights or remedies to which the COMPANY may be entitled at law or in equity, the COMPANY will have the right to take any of the following actions:
  - **15.5.1** enter upon the premises of the Franchised Restaurant and exercise complete authority with respect to the operation of the Store until such time as the COMPANY determines, in its sole discretion, that FRANCHISEE has cured the default and that there is compliance with the terms of this Agreement; and FRANCHISEE agrees that a designated representative of the COMPANY may operate and control the Store, and that FRANCHISEE will pay the COMPANY for its labor costs, travel expenses, lodging and other expenses reasonably incurred by the - COMPANY in sending a representative to enforce compliance with the terms of this Agreement; or
  - **15.5.2** petition any court of competent jurisdiction to appoint a receiver for the business or assets of FRANCHISEE, and FRANCHISEE agrees that it will not contest any proceeding or petition for the appointment of a receiver.
- **15.6 Liquidated Damages**. If FRANCHISEE abandons or discontinues the franchise for any reason prior to the expiration of the term of this Agreement, FRANCHISEE will pay to the COMPANY as liquidated damages and not as a penalty, and in addition to but not in limitation of any other rights and remedies to which the COMPANY is entitled, an amount equal to the average monthly continuing franchise fee payments due from FRANCHISEE during the twelve months preceding the abandonment or discontinuance of the franchise, multiplied by the lesser of twenty-four or the number of months remaining in the term of this Agreement.

Source: Item 23 — Receipts (FDD pages 53–163)

Question 2

What is the average Gross Sales for all 40 Gold Star Franchised G5 Outlets in 2024?

Accepted Answer

| Table 1 - Gold Star Chili Franchised Traditional Outlets |  |  |  |  |  |  |  |
|---|---|---|---|---|---|---|---|
|  |  |  | Range |  |  | Number of Restaurants Meeting or Exceeding the Average |  |
| Tier Number | Average Gross Sales | Median Gross Sales | Low End | High End | Number |  | Percentage |
| of |  |  |  |  |  | Number |  |
| Stores |  |  |  |  |  |  |  |
| Top | $ $1,592,551.41 | $1,497,802.33 | $1,285,629.03 | $1,928,629.03 | 5 |  | 41.7% |
| 25% 12 |  |  |  |  |  |  |  |
| Top | $1,355,631.81 | $1,242,198.60 | $1,057,612.66 | $1,928,629.03 | 10 |  | 41.7% |
| 50% 24 |  |  |  |  |  |  |  |
| Top | $1,207,778.82 | $1,119,733.62 | $779,464.33 | $1,928,398.90 | 12 |  | 33.3% |
| 75% 36 |  |  |  |  |  |  |  |![](_page_46_Picture_0.jpeg)

**Some Outlets have sold this amount. Your individual results may differ. There is no assurance that you'll sell as much.**

At the end of 2024, there were 40 **Franchised G5 Outlets**. A **Franchised G5 Outlet** is a **Franchised Traditional Outlet** that has implemented the current published design standards of facility modifications and menu. All new Restaurants in the System are now required to be **G5 Outlets**. The facility design standards include new building signage, awnings, paint colors, and drive thru equipment with respect to the exterior and new furniture, cabinetry, paint colors, and graphics with respect to the interior. The menu (which has been implemented at all Gold Star locations) includes chili products, fresh burgers, gourmet fries and salads. The annualized sales data for the **Franchised G5 Outlets** is a subset of and included in the annualized sales data for all **Franchised Traditional Outlets**. The financial performance representations in Table 2 below are historical based on information from indicated subsets of the 40 **Franchised G5 Outlets** that were open for the full fiscal year, January 1, 2024 through December 31, 2024. The entire set of 40 **Franchised G5 Outlets** experienced average Gross Sales of \$1,152,691.02(with 15 outlets, or 37

Source: Item 19 — Financial Performance Representations (FDD pages 46–48)

Question 3

What was the average Gross Sales for all 47 Franchised Traditional Gold Star Outlets in 2024?

Accepted Answer

ents the information provided in this Item 19, for example, by providing information about possible performance at a particular location or under particular circumstances.

At the end of 2024 there were 47 **Franchised Traditional Outlets** in operation and 1 **Franchised Non-Traditional Outlets** in operation. A **Franchised Traditional Outlet** is defined as a noncompany-owned Store that is free standing or on an end cap of a strip center and has a drive thru. A **Franchised Non-Traditional Outlet** is defined as a noncompany-owned Store located in a mall, amusement park, fairground, sports stadium, zoo or airport. The financial performance representations in Table 1 below are historical based on information from the indicated subsets of the 47 **Franchised Traditional Outlets** that were open for the full fiscal year, January 1, 2024 through December 31, 2024. The entire set of 47 **Franchised Traditional Outlets** experienced average Gross Sales of \$1,074,809.57 (with 21 outlets, or 44.7%, exceeding the average) and median Gross Sales of \$1,057,612.66. The low performer of this group had Gross Sales of \$345,765.49 and the high performer of this group had Gross Sales of \$1,928,398.90.

Source: Item 19 — Financial Performance Representations (FDD pages 46–48)

Question 4

What was the average Gross Sales for all 47 Gold Star Franchised Traditional Outlets in 2024?

Accepted Answer

ents the information provided in this Item 19, for example, by providing information about possible performance at a particular location or under particular circumstances.

At the end of 2024 there were 47 **Franchised Traditional Outlets** in operation and 1 **Franchised Non-Traditional Outlets** in operation. A **Franchised Traditional Outlet** is defined as a noncompany-owned Store that is free standing or on an end cap of a strip center and has a drive thru. A **Franchised Non-Traditional Outlet** is defined as a noncompany-owned Store located in a mall, amusement park, fairground, sports stadium, zoo or airport. The financial performance representations in Table 1 below are historical based on information from the indicated subsets of the 47 **Franchised Traditional Outlets** that were open for the full fiscal year, January 1, 2024 through December 31, 2024. The entire set of 47 **Franchised Traditional Outlets** experienced average Gross Sales of \$1,074,809.57 (with 21 outlets, or 44.7%, exceeding the

Source: Item 19 — Financial Performance Representations (FDD pages 46–48)

Question 5

For Gold Star, in which of the listed states is the Franchise Disclosure Document not registered?

Accepted Answer

The following states require that the Franchise Disclosure Document be registered or filed with the state, or be exempt from registration: California, Hawaii, Illinois, Indiana, Maryland, Minnesota, New York, North Dakota, Rhode Island, South Dakota, Virginia, Washington and Wisconsin.

Source: Item 23 — Receipts (FDD pages 53–163)

Question 6

What was the median Gross Sales for all Gold Star Franchised G5 Outlets in 2024?

Accepted Answer

| Table 1 - Gold Star Chili Franchised Traditional Outlets |  |  |  |  |  |  |  |
|---|---|---|---|---|---|---|---|
|  |  |  | Range |  |  | Number of Restaurants Meeting or Exceeding the Average |  |
| Tier Number | Average Gross Sales | Median Gross Sales | Low End | High End | Number |  | Percentage |
| of |  |  |  |  |  | Number |  |
| Stores |  |  |  |  |  |  |  |
| Top | $ $1,592,551.41 | $1,497,802.33 | $1,285,629.03 | $1,928,629.03 | 5 |  | 41.7% |
| 25% 12 |  |  |  |  |  |  |  |
| Top | $1,355,631.81 | $1,242,198.60 | $1,057,612.66 | $1,928,629.03 | 10 |  | 41.7% |
| 50% 24 |  |  |  |  |  |  |  |
| Top | $1,207,778.82 | $1,119,733.62 | $779,464.33 | $1,928,398.90 | 12 |  | 33.3% |
| 75% 36 |  |  |  |  |  |  |  |![](_page_46_Picture_0.jpeg)

**Some Outlets have sold this amount. Your individual results may differ. There is no assurance that you'll sell as much.**

At the end of 2024, there were 40 **Franchised G5 Outlets**. A **Franchised G5 Outlet** is a **Franchised Traditional Outlet** that has implemented the current published design standards of facility modifications and menu. All new Restaurants in the System are now required to be **G5 Outlets**. The facility design standards include new building signage, awnings, paint colors, and drive thru equipment with respect to the exterior and new furniture, cabinetry, paint colors, and graphics with respect to the interior. The menu (which has been implemented at all Gold Star locations) includes chili products, fresh burgers, gourmet fries and salads. The annualized sales data for the **Franchised G5 Outlets** is a subset of and included in the annualized sales data for all **Franchised Traditional Outlets**. The financial performance representations in Table 2 below are historical based on information from indicated subsets of the 40 **Franchised G5 Outlets** that were open for the full fiscal year, January 1, 2024 through December 31, 2024. The entire set of 40 **Franchised G5 Outlets** experienced average Gross Sales of \$1,152,691.02(with 15 outlets, or 37

Source: Item 19 — Financial Performance Representations (FDD pages 46–48)

Question 7

What was the median Gross Sales for Gold Star's Franchised Traditional Outlets in 2024?

Accepted Answer

ents the information provided in this Item 19, for example, by providing information about possible performance at a particular location or under particular circumstances.

At the end of 2024 there were 47 **Franchised Traditional Outlets** in operation and 1 **Franchised Non-Traditional Outlets** in operation. A **Franchised Traditional Outlet** is defined as a noncompany-owned Store that is free standing or on an end cap of a strip center and has a drive thru. A **Franchised Non-Traditional Outlet** is defined as a noncompany-owned Store located in a mall, amusement park, fairground, sports stadium, zoo or airport. The financial performance representations in Table 1 below are historical based on information from the indicated subsets of the 47 **Franchised Traditional Outlets** that were open for the full fiscal year, January 1, 2024 through December 31, 2024. The entire set of 47 **Franchised Traditional Outlets** experienced average Gross Sales of \$1,074,809.57 (with 21 outlets, or 44.7%, exceeding the

Source: Item 19 — Financial Performance Representations (FDD pages 46–48)

Question 8

What was the median Gross Sales for all Gold Star Franchised Traditional Outlets in 2024?

Accepted Answer

ents the information provided in this Item 19, for example, by providing information about possible performance at a particular location or under particular circumstances.

At the end of 2024 there were 47 **Franchised Traditional Outlets** in operation and 1 **Franchised Non-Traditional Outlets** in operation. A **Franchised Traditional Outlet** is defined as a noncompany-owned Store that is free standing or on an end cap of a strip center and has a drive thru. A **Franchised Non-Traditional Outlet** is defined as a noncompany-owned Store located in a mall, amusement park, fairground, sports stadium, zoo or airport. The financial performance representations in Table 1 below are historical based on information from the indicated subsets of the 47 **Franchised Traditional Outlets** that were open for the full fiscal year, January 1, 2024 through December 31, 2024. The entire set of 47 **Franchised Traditional Outlets** experienced average Gross Sales of \$1,074,809.57 (with 21 outlets, or 44.7%, exceeding the

Source: Item 19 — Financial Performance Representations (FDD pages 46–48)

Question 9

What percentage of Gold Star's accounts receivable at December 31, 2022, was accounted for by two customers?

Accepted Answer

The Company has sales from two customers in 2024, 2023, and 2022, which accounted for approximately 27%, 30%, and 35% of revenue during 2024, 2023, and 2022, respectively, and approximately 72%, 77%, and 99% of accounts receivable at December 31, 2024, 2023, and 2022

Source: Item 23 — Receipts (FDD pages 53–163)

Question 10

What percentage of Gold Star's cost of goods sold was accounted for by purchases from three suppliers in 2023?

Accepted Answer

The Company has purchases from three suppliers in 2024, 2023, and 2022, which accounted for approximately 54%, 64%, and 70% of cost of goods sold earned during 2024, 2023, and 2022, respectively, and approximately 24%, 16%, and 12% of accounts payable at December 31, 2024, 2023, and 2022.

Source: Item 23 — Receipts (FDD pages 53–163)

Question 11

What percentage of Gold Star Franchised G5 Outlets exceeded the average Gross Sales in 2024?

Accepted Answer

| Table 1 - Gold Star Chili Franchised Traditional Outlets |  |  |  |  |  |  |  |
|---|---|---|---|---|---|---|---|
|  |  |  | Range |  |  | Number of Restaurants Meeting or Exceeding the Average |  |
| Tier Number | Average Gross Sales | Median Gross Sales | Low End | High End | Number |  | Percentage |
| of |  |  |  |  |  | Number |  |
| Stores |  |  |  |  |  |  |  |
| Top | $ $1,592,551.41 | $1,497,802.33 | $1,285,629.03 | $1,928,629.03 | 5 |  | 41.7% |
| 25% 12 |  |  |  |  |  |  |  |
| Top | $1,355,631.81 | $1,242,198.60 | $1,057,612.66 | $1,928,629.03 | 10 |  | 41.7% |
| 50% 24 |  |  |  |  |  |  |  |
| Top | $1,207,778.82 | $1,119,733.62 | $779,464.33 | $1,928,398.90 | 12 |  | 33.3% |
| 75% 36 |  |  |  |  |  |  |  |![](_page_46_Picture_0.jpeg)

**Some Outlets have sold this amount. Your individual results may differ. There is no assurance that you'll sell as much.**

At the end of 2024, there were 40 **Franchised G5 Outlets**. A **Franchised G5 Outlet** is a **Franchised Traditional Outlet** that has implemented the current published design standards of facility modifications and menu. All new Restaurants in the System are now required to be **G5 Outlets**. The facility design standards include new building signage, awnings, paint colors, and drive thru equipment with respect to the exterior and new furniture, cabinetry, paint colors, and graphics with respect to the interior. The menu (which has been implemented at all Gold Star locations) includes chili products, fresh burgers, gourmet fries and salads. The annualized sales data for the **Franchised G5 Outlets** is a subset of and included in the annualized sales data for all **Franchised Traditional Outlets**. The financial performance representations in Table 2 below are historical based on information from indicated subsets of the 40 **Franchised G5 Outlets** that were open for the full fiscal year, January 1, 2024 through December 31, 2024. The entire set of 40 **Franchised G5 Outlets** experienced average Gross Sales of \$1,152,691.02(with 15 outlets, or 37

Source: Item 19 — Financial Performance Representations (FDD pages 46–48)

Question 12

What percentage of Gold Star's Franchised Traditional Outlets exceeded the average Gross Sales in 2024?

Accepted Answer

ents the information provided in this Item 19, for example, by providing information about possible performance at a particular location or under particular circumstances.

At the end of 2024 there were 47 **Franchised Traditional Outlets** in operation and 1 **Franchised Non-Traditional Outlets** in operation. A **Franchised Traditional Outlet** is defined as a noncompany-owned Store that is free standing or on an end cap of a strip center and has a drive thru. A **Franchised Non-Traditional Outlet** is defined as a noncompany-owned Store located in a mall, amusement park, fairground, sports stadium, zoo or airport. The financial performance representations in Table 1 below are historical based on information from the indicated subsets of the 47 **Franchised Traditional Outlets** that were open for the full fiscal year, January 1, 2024 through December 31, 2024. The entire set of 47 **Franchised Traditional Outlets** experienced average Gross Sales of \$1,074,809.57 (with 21 outlets, or 44.7%, exceeding the

Source: Item 19 — Financial Performance Representations (FDD pages 46–48)

Question 13

What percentage of Gold Star Franchised Traditional Outlets exceeded the average Gross Sales in 2024?

Accepted Answer

ents the information provided in this Item 19, for example, by providing information about possible performance at a particular location or under particular circumstances.

At the end of 2024 there were 47 **Franchised Traditional Outlets** in operation and 1 **Franchised Non-Traditional Outlets** in operation. A **Franchised Traditional Outlet** is defined as a noncompany-owned Store that is free standing or on an end cap of a strip center and has a drive thru. A **Franchised Non-Traditional Outlet** is defined as a noncompany-owned Store located in a mall, amusement park, fairground, sports stadium, zoo or airport. The financial performance representations in Table 1 below are historical based on information from the indicated subsets of the 47 **Franchised Traditional Outlets** that were open for the full fiscal year, January 1, 2024 through December 31, 2024. The entire

Source: Item 19 — Financial Performance Representations (FDD pages 46–48)

Question 14

What percentage of Gold Star's revenue was accounted for by sales from two customers in 2024?

Accepted Answer

The Company has sales from two customers in 2024, 2023, and 2022, which accounted for approximately 27%, 30%, and 35% of revenue during 2024, 2023, and 2022, respectively, and approximately 72%, 77%, and 99% of accounts receivable at December 31, 2024, 2023, and 2022

Source: Item 23 — Receipts (FDD pages 53–163)

Question 15

What specific actions are Gold Star franchisees prohibited from taking regarding the company's intellectual property?

Accepted Answer

**6.11 Notice to the Public**. FRANCHISEE will identify itself to the public as the owner of the Store in at least one conspicuous location in the Store and in any other documentation that the COMPANY may reasonably specify. FRANCHISEE will not use the Marks or the System to incur any obligation or indebtedness on behalf of the COMPANY, or in connection with any activity that may harm, tarnish or impair the COMPANY's reputation, name, service, Marks or System. The COMPANY assumes no liability to FRANCHISEE or any third party with respect to the quality of any materials, supplies, food items, sauces, or services or any other items provided or promoted by the COMPANY and as distributed or provided by FRANCHISEE under the name GOLD STAR CHILI or any other Mark, and FRANCHISEE will indemnify, hold harmless and insure the COMPANY against any liability, loss or expense (including reasonable attorney fees) arising out of FRANCHISEE's use of the Marks or the System.

Source: Item 23 — Receipts (FDD pages 53–163)

Question 16

What is the total amount of remaining maturities on the notes payable for Gold Star as of the date of this FDD?

Accepted Answer

4, 2023, and 2022, respectively. The line matures in August 2025 and is subject to certain financial covenants, all of which were either waived or met at December 31, 2024.

The Company has another draw line of credit with the same bank. This line of credit is specific to capital expenditures and is collateralized by a blanket lien on all of the Company's general business assets and charges interest at the Term Secured Overnight Financing Rate (SOFR) plus 2.35% (the Term SOFR was 4.49% at December 31, 2024). The amount utilized was \$1,500,000, \$802,996, and \$-0- at December 31, 2024, 2023, and 2022, respectively. Principal payments of \$8,334 are due monthly beginning in January 2025 with a balloon payment due upon maturity in August 2028. The line of credit is subject to certain financial covenants, all of which were either waived or met at December 31, 2024.

#### **NOTE 11 – NOTE PAYABLE**

The Company had seven notes that were all consolidated into one note payable in 2020 with a bank that has a balloon payment due in March 2027. In August 2023, the note was refinanced and extended to August 2028. The note bears interest at Term Secured Overnight Financing Rate (SOFR) plus 2.35% (the Term SOFR was 4.49% at December 31, 2024). The note payable is subject to certain financial covenants, all of which were met or waived at December 31, 2024. The note is collateralized by property and, where applicable, an assignment of rents.

The remaining maturities on these notes are as follows:

| 2025                      | \$  | 766,667    |
|---------------------------|-----|------------|
| 2026 |  | 816,667 |
| 2027 |  | 866,667 |
| 2028 | _ _ | 9,658,333 |
|  | \$_ | 12,108,334 |
#### **NOTE 12 – FRANCHISE REVENUE**

Continuing franchise fees (royalties) are reflected in net sales and amounted to \$2,612,040, \$2,703,632, and \$2,690,769 in 2024, 2023, and 2022, respectively.

#### **NOTE 13 – REVENUE SHARING AGREEMENT**

In April 2023, the Company entered into a revenue sharing agreement for a Tom + Chee restaurant at Kings Island. The Company is responsible for staffing and operating the location during the year. The agreement terminates in January 2026. Total revenue included in sales on the statements of income and comprehensive income for the years ended December 31, 2024 and 2023 were \$694,760 and \$652,848, respectively.

Source: Item 23 — Receipts (FDD pages 53–163)

Question 17

During which years were Gold Star's long-lived assets measured for impairment, and were any adjustments necessary?

Accepted Answer

Long-lived assets were measured for impairment, and no adjustments were deemed necessary during any of the years ended December 31, 2024, 2023 and 2022.

Source: Item 23 — Receipts (FDD pages 53–163)

Question 18

What are the different amounts for the initial franchise fee for Gold Star (Item 5) and how do these amounts relate to the level of risk and uncertainty associated with the franchise opportunity?

Accepted Answer

ial Fees**

#### **Initial Franchise Fee.**

All Franchisees who are purchasing their first Gold Star Franchise must pay a \$50,000 lump sum when the Franchisee signs the Franchise Agreement. Existing Franchisees who are purchasing their second, third or fourth Gold Star Franchise must pay a \$25,000 lump sum when the Franchisee signs the Franchise Agreement. Existing Franchisees who are purchasing their fifth or more Gold Star Franchise must pay a \$10,000 lump sum when the Franchisee signs the Franchise Agreement. All Franchisees who are purchasing a Gold Star Franchise which will be operated at a location at which a Gold Star restaurant has been operated during the previous six months, will pay the lesser of \$25,000 or the amount such Franchisee would otherwise be required to pay if such restaurant is a "new" restaurant, when the Franchisee signs the Franchise Agreement.

You must pay the initial franchise fee in full when you sign the Franchise Agreement. The initial franchise fee is fully earned by Gold Star upon receipt and is

Question 19

What are the different amounts for the initial franchise fee for Gold Star (Item 5) and how do these amounts relate to the level of support and training provided by the franchisor (Item 11)?

Accepted Answer

ial Fees**

#### **Initial Franchise Fee.**

All Franchisees who are purchasing their first Gold Star Franchise must pay a \$50,000 lump sum when the Franchisee signs the Franchise Agreement. Existing Franchisees who are purchasing their second, third or fourth Gold Star Franchise must pay a \$25,000 lump sum when the Franchisee signs the Franchise Agreement. Existing Franchisees who are purchasing their fifth or more Gold Star Franchise must pay a \$10,000 lump sum when the Franchisee signs the Franchise Agreement. All Franchisees who are purchasing a Gold Star Franchise which will be operated at a location at which a Gold Star restaurant has been operated during the previous six months, will pay the lesser of \$25,000 or the amount such Franchisee would otherwise be required to pay if such restaurant is a "new" restaurant, when the Franchisee signs the Franchise Agreement.

You must pay the initial franchise fee in full when you sign the Franchise Agreement. The initial franchise fee is fully earned by Gold Star upon receipt and is

Question 20

What are the different amounts for the initial franchise fee for Gold Star (Item 5) and how do these amounts relate to the long-term profitability and return on investment for the franchise?

Accepted Answer

ial Fees**

#### **Initial Franchise Fee.**

All Franchisees who are purchasing their first Gold Star Franchise must pay a \$50,000 lump sum when the Franchisee signs the Franchise Agreement. Existing Franchisees who are purchasing their second, third or fourth Gold Star Franchise must pay a \$25,000 lump sum when the Franchisee signs the Franchise Agreement. Existing Franchisees who are purchasing their fifth or more Gold Star Franchise must pay a \$10,000 lump sum when the Franchisee signs the Franchise Agreement. All Franchisees who are purchasing a Gold Star Franchise which will be operated at a location at which a Gold Star restaurant has been operated during the previous six months, will pay the lesser of \$25,000 or the amount such Franchisee would otherwise be required to pay if such restaurant is a "new" restaurant, when the Franchisee signs the Franchise Agreement.

You must pay the initial franchise fee in full when you sign the Franchise Agreement. The initial franchise fee is fully earned by Gold Star upon receipt and is

Question 21

What are the different amounts for the initial franchise fee for Gold Star (Item 5) and how do these amounts relate to the potential profitability of the franchise (if discussed elsewhere)?

Accepted Answer

ial Fees**

#### **Initial Franchise Fee.**

All Franchisees who are purchasing their first Gold Star Franchise must pay a \$50,000 lump sum when the Franchisee signs the Franchise Agreement. Existing Franchisees who are purchasing their second, third or fourth Gold Star Franchise must pay a \$25,000 lump sum when the Franchisee signs the Franchise Agreement. Existing Franchisees who are purchasing their fifth or more Gold Star Franchise must pay a \$10,000 lump sum when the Franchisee signs the Franchise Agreement. All Franchisees who are purchasing a Gold Star Franchise which will be operated at a location at which a Gold Star restaurant has been operated during the previous six months, will pay the lesser of \$25,000 or the amount such Franchisee would otherwise be required to pay if such restaurant is a "new" restaurant, when the Franchisee signs the Franchise Agreement.

You must pay the initial franchise fee in full when you sign the Franchise Agreement. The initial franchise fee is fully earned by Gold Star upon receipt and is

Question 22

What are the different amounts for the initial franchise fee for Gold Star (Item 5) and how do these amounts relate to the potential for future growth and expansion of the franchise system?

Accepted Answer

ial Fees**

#### **Initial Franchise Fee.**

All Franchisees who are purchasing their first Gold Star Franchise must pay a \$50,000 lump sum when the Franchisee signs the Franchise Agreement. Existing Franchisees who are purchasing their second, third or fourth Gold Star Franchise must pay a \$25,000 lump sum when the Franchisee signs the Franchise Agreement. Existing Franchisees who are purchasing their fifth or more Gold Star Franchise must pay a \$10,000 lump sum when the Franchisee signs the Franchise Agreement. All Franchisees who are purchasing a Gold Star Franchise which will be operated at a location at which a Gold Star restaurant has been operated during the previous six months, will pay the lesser of \$25,000 or the amount such Franchisee would otherwise be required to pay if such restaurant is a "new" restaurant, when the Franchisee signs the Franchise Agreement.

You must pay the initial franchise fee in full when you sign the Franchise Agreement. The initial franchise fee is fully earned by Gold Star upon receipt and is

Question 23

What are the different amounts for the initial franchise fee for Gold Star (Item 5) and how do these amounts relate to the potential for future revenue growth and profitability of the franchise?

Accepted Answer

ial Fees**

#### **Initial Franchise Fee.**

All Franchisees who are purchasing their first Gold Star Franchise must pay a \$50,000 lump sum when the Franchisee signs the Franchise Agreement. Existing Franchisees who are purchasing their second, third or fourth Gold Star Franchise must pay a \$25,000 lump sum when the Franchisee signs the Franchise Agreement. Existing Franchisees who are purchasing their fifth or more Gold Star Franchise must pay a \$10,000 lump sum when the Franchisee signs the Franchise Agreement. All Franchisees who are purchasing a Gold Star Franchise which will be operated at a location at which a Gold Star restaurant has been operated during the previous six months, will pay the lesser of \$25,000 or the amount such Franchisee would otherwise be required to pay if such restaurant is a "new" restaurant, when the Franchisee signs the Franchise Agreement.

You must pay the initial franchise fee in full when you sign the Franchise Agreement. The initial franchise fee is fully earned by Gold Star upon receipt and is

Question 24

What are the different amounts for the initial franchise fee for Gold Star (Item 5) and how do these amounts relate to the size and location of the franchise unit (Item 7)?

Accepted Answer

ial Fees**

#### **Initial Franchise Fee.**

All Franchisees who are purchasing their first Gold Star Franchise must pay a \$50,000 lump sum when the Franchisee signs the Franchise Agreement. Existing Franchisees who are purchasing their second, third or fourth Gold Star Franchise must pay a \$25,000 lump sum when the Franchisee signs the Franchise Agreement. Existing Franchisees who are purchasing their fifth or more Gold Star Franchise must pay a \$10,000 lump sum when the Franchisee signs the Franchise Agreement. All Franchisees who are purchasing a Gold Star Franchise which will be operated at a location at which a Gold Star restaurant has been operated during the previous six months, will pay the lesser of \$25,000 or the amount such Franchisee would otherwise be required to pay if such restaurant is a "new" restaurant, when the Franchisee signs the Franchise Agreement.

You must pay the initial franchise fee in full when you sign the Franchise Agreement. The initial franchise fee is fully earned by Gold Star upon receipt and is

Question 25

What are the different amounts for the initial franchise fee for Gold Star (Item 5) and what factors determine which amount a franchisee pays?

Accepted Answer

ial Fees**

#### **Initial Franchise Fee.**

All Franchisees who are purchasing their first Gold Star Franchise must pay a \$50,000 lump sum when the Franchisee signs the Franchise Agreement. Existing Franchisees who are purchasing their second, third or fourth Gold Star Franchise must pay a \$25,000 lump sum when the Franchisee signs the Franchise Agreement. Existing Franchisees who are purchasing their fifth or more Gold Star Franchise must pay a \$10,000 lump sum when the Franchisee signs the Franchise Agreement. All Franchisees who are purchasing a Gold Star Franchise which will be operated at a location at which a Gold Star restaurant has been operated during the previous six months, will pay the lesser of \$25,000 or the amount such Franchisee would otherwise be required to pay if such restaurant is a "new" restaurant, when the Franchisee signs the Franchise Agreement.

You must pay the initial franchise fee in full when you sign the Franchise Agreement. The initial franchise fee is fully earned by Gold Star upon receipt and is

Question 26

What is the due date for the initial franchise fee for Gold Star (Item 5) and how does it relate to the 'When Due' column for other expenses in the estimated initial investment (Item 7)?

Accepted Answer

You must pay the initial franchise fee in full when you sign the Franchise Agreement.

| Type of Expenditure | Amount for Free Standing Building | Amount for Inline Space | Method of Payment | When Due | To Whom Payment Is To Be Made |
|---|---|---|---|---|---|
| Initial Franchise Fee2 | $10,000 to $50,000 | $10,000 to $50,000 | Cashier’s Check | At signing of the Franchise Agreement | Gold Star |

Question 27

How does the initial franchise fee for a first-time Gold Star franchisee (Item 5) compare to the real property & site work costs listed in Item 7?

Accepted Answer

sclosed in this Item.

#### **Item 5**

#### **Initial Fees**

#### **Initial Franchise Fee.**

All Franchisees who are purchasing their first Gold Star Franchise must pay a \$50,000 lump sum when the Franchisee signs the Franchise Agreement. Existing Franchisees who are purchasing their second, third or fourth Gold Star Franchise must pay a \$25,000 lump sum when the Franchisee signs the Franchise Agreement. Existing Franchisees who are purchasing their fifth or more Gold Star Franchise must pay a \$10,000 lump sum when the Franchisee signs the Franchise Agreement. All Franchisees who are purchasing a Gold Star Franchise which will be operated at a location at which a Gold Star restaurant has been operated during the previous six months, will pay the lesser of \$25,000 or the amount such Franchisee would otherwise be required to pay if such restaurant is a "new" restaurant, when the Franchisee signs the Franchise Agreement.

You must pay the initial franchise fee in full when you sign the Franchise Agreement. The initial franchise fee is fully earned by Gold Star upon receipt and is not refundable under any circumstances.

![](_page_11_Picture_0.jpeg)

#### **Opening Inventory and Other Goods.**

You must purchase all of your requirements for Gold Star's chili products and other proprietary food itemsfrom Gold Star or our designees, which currently consist of a bakery product supplier and a supplier for all other food products. You must also purchase certain non-food products approved for Restaurant sale or use, including Restaurant menus, menu board pictures, window logos, window striping and certain food products and supplies from Gold Star or our designees. Payment for these products are uniform for all Franchisees, but the actual amount of payments for inventory and other goods before the Restaurant opens ranges from approximately \$8,000 to \$12,000, depending upon the quantity of items purchased.

## **Item 6 OTHER FEES**

| Type of Fee | Amount | Due Date | Remarks |
|---|---|---|---|
| Supplier Payment Assignment5 | 100% of product and/or advertising rebates or allowances from certain system- wide suppliers | Assigned when Franchise Agreement is signed | Payable to GSCAA Non-refundable |
| Inventory and Other Materials6 | See Item 8 of this disclosure document | On delivery or as established by designated supplier | Payable to designated supplier Non-refundable |
| Manual Fee | $100 for any additional copy | On delivery | Payable to Gold Star Non-refundable |
| Additional Training Fee7 | Reasonable training fee at our current rates. Also, you must reimburse us for our reasonable out of pocket costs (travel, accommodations, etc.) | Before opening or after you open your franchised Restaurant for business. | Payable to Gold Star Non-refundable |
| Approval Fees8 | Not to exceed reasonable cost of inspection and actual cost of testing or evaluation | On demand | Payable to Gold Star Non-refundable |
| Transfer Fee9 | Set by Gold Star in its discretion - currently $3,500 | Before consummation of transfer or sale | Payable to Gold Star by any transferee (not the Franchisor) Non-refundable |![](_page_12_Picture_0.jpeg)

| Type of Fee | Amount | Due Date | Remarks |
|---|---|---|---|
| Renewal Fee10 | Set by Gold Star in its discretion – currently $5,000 | Prior to renewal of franchise agreement | Payable to Gold Star Non-refundable |
| Relocation | You will reimburse us for our reasonable out-of-pocket costs concerning the relocation | Promptly after receiving an invoice from Gold Star | Payable to Gold Star Non-refundable |
| Operating Fee11 | 125% of Gold Star, or its designees, cost of operation | Same as Continuing Franchise Fee | Payable to Gold Star or its designated operator Non-refundable |
| Operating Deficiency Fee12 | Daily fee of $100 for each day you fail to cure operating deficiencies after expiration of the cure period | On demand | Payable to Gold Star or its designated operator Non-refundable |
| Audit Fee13 | Cost of audit plus interest and late payment charge on underpayment | On demand | Payable to Gold Star Non-refundable |
| Liquidated Damages upon Breach of Confidentiality14 | $100,000 for each breach | On demand | Payable to Gold Star Non-refundable |
| Indemnification15 | Amount of claim, loss, damages, etc.

Question 28

What is the range of the initial franchise fee for Gold Star (Item 5) and how does this compare to the ongoing royalty fees (if any, mentioned elsewhere)?

Accepted Answer

ial Fees**

#### **Initial Franchise Fee.**

All Franchisees who are purchasing their first Gold Star Franchise must pay a \$50,000 lump sum when the Franchisee signs the Franchise Agreement. Existing Franchisees who are purchasing their second, third or fourth Gold Star Franchise must pay a \$25,000 lump sum when the Franchisee signs the Franchise Agreement. Existing Franchisees who are purchasing their fifth or more Gold Star Franchise must pay a \$10,000 lump sum when the Franchisee signs the Franchise Agreement. All Franchisees who are purchasing a Gold Star Franchise which will be operated at a location at which a Gold Star restaurant has been operated during the previous six months, will pay the lesser of \$25,000 or the amount such Franchisee would otherwise be required to pay if such restaurant is a "new" restaurant, when the F

Question 29

What is the range of the initial franchise fee for Gold Star (Item 5) and how does it relate to the estimated initial investment for a free-standing building (Item 7)?

Accepted Answer

## **YOUR ESTIMATED INITIAL INVESTMENT** ¹ | Type of Expenditure | Amount for Free Standing Building | Amount for Inline Space | Method of Payment | When Due | To Whom Payment Is To Be Made | |---|---|---|---|---|---| | Initial Franchise Fee2 | $10,000 to $50,000 | $10,000 to $50,000 | Cashier’s Check | At signing of the Franchise Agreement | Gold Star | | Real Property & Site work Costs | (See Note 1) | (See Note 1) | As Arranged | Before Opening | Lessor or Property Owner; Other Third Parties | | Furniture, Fixtures and | $109,100 to | $108,368 to | As Arranged | Before Opening | Approved | | Equipment3 | $305,379 | $220,000 | | | Suppliers | | Building, Construction and Leasehold Improvements4 | $287,930 to $1,207,022 | $287,618 to $400,000 | (See Note 4) | (See Note 4) | (See Note 4) | | Utility Deposits | $1,000 to $3,000 | $1,000 to $3,000 | As Arranged | Before Opening | Suppliers and Utilities | | Architectural and | $14,000 to | $12,935 to | As Arranged | Before Opening | Approved | | Engineering Fees | $39,792 | $25,000 | | | Suppliers | | Initial Inventory | $8,000 to $12,000 | $8,000 to $12,000 | As Arranged | Before Opening | Gold Star, Approved Suppliers | | Insurance | $1,000 to $3,000 | $1,000 to $3,000 | As Arranged | Before Beginning Operations | Insurance Companies |![](_page_18_Picture_0.jpeg) | Type of Expenditure | Amount for Free Standing Building | Amount for Inline Space | Method of Payment | When Due | To Whom Payment Is To Be Made | |---|---|---|---|---|---| | Signs and Awning | $38,737 to $46,285 | $31,510 to $38,737 | As Arranged | Before Opening | Approved Contractors | | Training5 | $5,500 to $10,000 | $5,500 to $10,000 | As Arranged | Before Opening | Employees, Miscellaneous Vendors | | Licenses & Permits | $1,350 to $11,972 | $1,000 to $5,000 | As Arranged | Before Beginning Operations | Licensing Authorities | | Legal & Accounting | $2,500 | $2,500 | As Arranged | Before Beginning Operations | Attorney, Accountant | | Office Equipment and | $1,000 | $1,000 | As Arranged | Before Opening | Suppliers | | Supplies | | | | | | | Grand Opening | $10,000 | $10,000 | As Arranged | Within 3 months | Miscellaneous | | Advertising6 | | | | of Opening | Vendors | | Additional Funds - 3 Months7 | $15,000 to $30,000 | $15,000 to $30,000 | As Arranged | As Incurred | Gold Star, Employees, Suppliers, Utilities, Insurers, Professionals, Etc.

Question 30

Under what conditions can a Gold Star franchisee disclose Confidential Material to employees?

Accepted Answer

Gold Star asserts trade secret protection for information contained in the Manual and other information about its chili products, recipes and formulations, the System and the Business (the "Confidential Material"), and pursuant to the Franchise Agreement you agree that the Confidential Material constitutes proprietary highly confidential trade secrets and that you will not use any of the Confidential Material except as necessary in the operation of the Franchise business in accordance with the Franchise Agreement. You also agree that you will not disclose, duplicate, license, sell or reveal any of the Confidential Material to any person, other than disclosure to one or more of your employees to the extent that the employee is required by his/her work in accordance with the Franchise Agreement to be familiar with relevant Confidential Material. You agree to keep confidential the Confidential Material, to obtain from each of your partners, shareholders, officers, directors, employees and agents an agreement to keep and respect these confidences and to be responsible for compliance by all of those persons with those agreements.

You must advise Gold Star promptly in writing if you learn of any claims made regarding, or unauthorized use of, any Confidential Material, whether by a Related Party or a third party. Gold Star is not obligated to take any action, but may take any action it deems appropriate. Gold Star is not obligated to indemnify you for expenses or damages in a proceeding involving any of the Confidential Information.

Source: Item 14 — Patents, Copyrights, and Proprietary Information (FDD pages 40–41)

Question 31

According to the Gold Star franchise agreement, what actions must a franchisee take if rebuilding after destruction is prohibited by law?

Accepted Answer

- **14.4.4** Without the prior written consent of the COMPANY, FRANCHISEE ceases to operate the Business for more than 24-hour period if required to be operating during that time in the Manual or abandons the Business or the Store or, upon destruction of the Retail Location, fails to rebuild it and resume operation with a reasonable time.

However, cessation of the Business shall not constitute default of this Agreement if caused by condemnation, appropriation, expiration of the term of the Lease (except when due to FRANCHISEE's fault or neglect), or when rebuilding following destruction of the buildings at the Retail Location is prohibited by law or the Lease so long as FRANCHISEE is actively seeking a new location pursuant to Section 1.5, above, and is otherwise in compliance with this Agreement;

Source: Item 23 — Receipts (FDD pages 53–163)

Question 32

According to the Gold Star franchise agreement addendum, what jurisdictional requirements must be met for each provision of the addendum to be effective?

Accepted Answer

- 4. Each provision of this Addendum shall be effective only to the extent, with respect to such provision, that the jurisdictional requirements of the Indiana Franchise Disclosure Law, Indiana Code §§ 23-2-2.5-1 to 23-2-2.5-51 and the Indiana Deceptive Franchise Practices Act, Indiana Code §§ 23-2-2.7-1 to 23-2-2.7-7, are met independently without reference to this Amendment.

Source: Item 23 — Receipts (FDD pages 53–163)

Question 33

According to the Gold Star franchise agreement addendum, under what condition will a provision limiting litigation for breach of the agreement be void?

Accepted Answer

- 3. Section 22 of the Agreement, under the heading, "Choice of Law; Jurisdiction; Limitation of Claims," shall be supplemented with the addition of the following subsection 22.7, which shall be considered an integral part of this Agreement:
  - "22.7 Notwithstanding the above, any provision in the Agreement which limits in any manner whatsoever litigation brought for breach of the Agreement will be void only to the extent that such provision violates the Indiana Deceptive Franchise Practices Act.
- 4. Each provision of this Addendum shall be effective only to the extent, with respect to such provision, that the jurisdictional requirements of the Indiana Franchise Disclosure Law, Indiana Code §§ 23-2-2.5-1 to 23-2-2.5-51 and the Indiana Deceptive Franchise Practices Act, Indiana Code §§ 23-2-2.7-1 to 23-2-2.7-7, are met independently without reference to this Amendment.

Source: Item 23 — Receipts (FDD pages 53–163)

Question 34

According to the Gold Star franchise agreement, can the franchisee assign the agreement without Gold Star's consent?

Accepted Answer

INTEREST.**

- **13.1 Assignment by Company**. This Agreement shall inure to the benefit of the COMPANY and its successors and assigns. The COMPANY may sell, transfer or assign this Agreement and any rights or duties hereunder to any third party at any time, and upon the giving of written notice to FRANCHISEE of any such transfer, COMPANY will have no further responsibility for the performance of any of the transferred obligations. FRANCHISEE shall execute any forms that the COMPANY may reasonably require in connection with any transfer or assignment by the COMPANY.
- **13.2 No Assignment by Franchisee**. The COMPANY has granted this franchise in reliance on the individual or collective character, skill, aptitude and business and financial capacity of FRANCHISEE and its Principals. Accordingly, neither FRANCHISEE nor any person with an interest in FRANCHISEE shall (directly or indirectly, contingently, voluntarily, involuntarily, by contract, by will, by merger or consolidation, by transfer or issuance of stock, membership or partnership interests, by operation of law or otherwise), without the prior written consent of the COMPANY, sell, assign, transfer, convey, issue, lease, pledge, mortgage, encumber or make any disposition of in any manner (collectively, "Transfer"), or permit the Transfer of, or publicly advertise or offer any Transfer of, all or any part of any of the following or any interest therein (collectively the "Restricted Assets"): this Agreement, the Business, the Store, the Retail Location (whether owned or leased), any Lease, any interest or share in FRANCHISEE which results in a Change-in-Control (defined below), or all or a material part of the assets, real or personal, tangible or intangible, pertaining to the Store or the Business. A "Change-in-Control" transaction or series of transactions shall occur when 50% or more of the voting power of FRANCHISEE is vested in a person or persons (as applicable) different from the person or persons (as applicable) with whom 50% of voting power was vested immediately prior to the transaction or series of transactions. For purposes of this subparagraph, all transfers of an ownership interest in a nonindividual franchisee occurring since the date the entity first became a franchisee will be aggregated to determine whether a Change-in-Control has occurred.
- **13.3 Company's Right of First Refusal**. Notwithstanding anything contained in this Agreement to the contrary, if FRANCHISEE or any Principal wishes to Transfer or accept an offer to Transfer, in any manner whatsoever, all or any part of any of the Restricted Assets, or any interest therein, FRANCHISEE or its Principals, as the case may be, will first obtain a bona fide, executed, written offer from a fullydisclosed purchaser and will submit an exact copy thereof to the COMPANY. After the receipt by the COMPANY of such offer, the COMPANY shall have thirty (30) days to purchase the Restricted Assets for the price and on the terms and conditions contained in the written proposed offer. Failure of the COMPANY to accept such offer within said thirty (30) days shall constitute a rejection (provided that the COMPANY may substitute cash for any form of payment proposed in such offer and shall have not less than sixty (60) days to prepare for

![](_page_88_Picture_0.jpeg)

closing).

Source: Item 23 — Receipts (FDD pages 53–163)

Question 35

According to the Gold Star franchise agreement, what happens in the event of a conflict between a clause in the agreement and mandatory applicable provisions of the Franchise Laws of the state where the store is located?

Accepted Answer

"Except to the extent governed by the United States Trademark Act of 1946 (Lanham Act, 15 U.S.C. §§ 1051 et seq.), other applicable federal law, or, the Indiana Franchise Disclosure Law or the Indiana Deceptive Franchise Practices Act, this Agreement was accepted and executed in the State of Ohio and its terms shall be construed in accordance with and governed by laws of the State of Ohio. In the event of any conflict of any clause in this Agreement with any mandatory applicable provisions of the Franchise Laws or other laws of the state wherein the Store is located such clause shall be considered modified to the extent, and only to the extent, necessary to conform with such mandatory provisions of that state's laws. As stated in this Agreement, the term "Franchise Law" means any mandatory provision of the law of any state which specifically regulates the offer, sale, termination, renewal or other specific aspects of franchises and does not mean the general laws other than such specific franchise act. Except as expressly provided to the contrary herein, each provision of this Agreement shall be considered severable and the invalidity or unenforceability of any part of this Agreement shall not effect the balance of this Agreement."

Source: Item 23 — Receipts (FDD pages 53–163)

Question 36

According to the Gold Star Franchise Agreement, can the term of the franchise be shorter than 10 years, and if so, under what condition?

Accepted Answer

| Provision | Section in | Summary |
|---|---|---|
|  | Franchise Agreement |  |
| a. Term of the Franchise | Section 1.2 | 10 years or, if less, term of lease for Retail Location |

Source: Item 17 — Renewal, Termination, Transfer, and Dispute Resolution (FDD pages 42–45)

Question 37

According to the Small Business Association Addendum, what is the maximum period of time Gold Star will operate the restaurant due to death or incapacitation of the manager?

Accepted Answer

| Provision | Section in | Summary |
|---|---|---|
|  | Franchise Agreement |  |
| p. Your death or disability (or that of any person having an interest in you or in the Franchise) | Section 13.8 and the Small Business Association Addendum if applicable | Franchise must be assigned by estate to approved buyer (and pursuant to transfer conditions) in 6 months (see (m), above); if Manager dies or becomes incapacitated and you do not have in place an acceptable successor Manager, Gold Star has the right to operate your Restaurant and charge you an operating fee during the interim period; Under the Small Business Association Addendum if applicable, Gold Star will operate the Restaurant for no more than a 90-day period of time |

Source: Item 17 — Renewal, Termination, Transfer, and Dispute Resolution (FDD pages 42–45)

Question 38

According to the Small Business Association Addendum, does Gold Star have the right to acquire the retail location?

Accepted Answer

| Provision | Section in | Summary |
|---|---|---|
|  | Franchise Agreement |  |
| i. Your obligations on termination/nonrenewal | Section 15 | Obligations include complete deidentification; payment of amounts due; return of proprietary and other confidential items, as well as all inventory and equipment bearing the Marks; transfer of phone listings and numbers; confidentiality obligations; indemnity obligations (also see (o) and (r), below) |
| j. Assignment of contract | Section 13.1 | No restriction on Gold Star's right to assign |
| by Gold Star |  |  |
| k. “Transfer” by you - | Section 13.2 | Includes transfer of contract or assets, certain ownership |
| definition |  | changes, grant of liens |
| l. Gold Star’s approval of transfer by Franchisee | Section 13.4 and the Small Business Association Addendum if applicable | Gold Star has the right to approve all transfers (also see (n) below) |
| m. Conditions for Gold Star approval of transfer | Section 13.4 and the Small Business Association Addendum if applicable | Gold Star not obligated to approve any transfer--minimum conditions include: you are in good standing; new franchisee qualifies; transfer fee paid; purchase agreement approved; training arranged; release signed by you (and your shareholders and partners) and current agreement and related documents signed by new franchisee (also see (n) and (r), below); Under the Small Business Association Addendum, Gold Star may not unreasonably withhold, condition, or delay its consent. |
| n. Gold Star’s right of first | Section 13.3 | Gold Star can match any offer |
| refusal to acquire your |  |  |
| business |  |  |
| o. Gold Star’s option to purchase your business | Sections 15.2 and 15.3 and the Small Business Association Addendum if Applicable | Gold Star has option to acquire Retail Location (or lease), equipment and furnishings upon termination or expiration of Franchise Agreement or permanent closing of Retail Location; Under the Small Business Association Addendum Gold Start does not have the right to acquire the Retail Location |

Source: Item 17 — Renewal, Termination, Transfer, and Dispute Resolution (FDD pages 42–45)

Question 39

What action can Gold Star take if a default is not remedied in a timely manner?

Accepted Answer

If you fail to open your franchised Restaurant for business within twelve (12) months of the approval of your Retail Location, you will be in default of the Franchise Agreement. You will have 10 days after receipt of Gold Star's written notice of default to remedy the default. If the default is not remedied timely and satisfactorily, Gold Star may terminate your Franchise Agreement, at its option.

Source: Item 11 — Franchisor's Assistance, Advertising, Computer Systems, and Training (FDD pages 26–36)

Question 40

Does the Gold Star agreement define 'Related Parties'?

Accepted Answer

- **11.2 Application of Covenants to Related Parties**. Upon the COMPANY's request, FRANCHISEE will require the following persons to execute covenants similar to those set forth in this Section 11 (including covenants applicable upon the termination of a person's relationship with FRANCHISEE): (1) all managers, officers and directors of FRANCHISEE; (2) all holders of a beneficial interest of 5% or more of the securities (including membership interests) of FRANCHISEE, and of any corporation or limited liability company directly or indirectly controlling FRANCHISEE, if FRANCHISEE is a corporation or limited liability company; and (3) all general partners of FRANCHISEE (including any corporation, and the officers, directors, and holders of a beneficial interest of 5% or more of the securities of any corporation which controls, directly or indirectly, any general partner), if FRANCHISEE is a partnership (collectively, "Related Parties"). Every covenant required by this Section 11 will be in a form satisfactory to the COMPANY. Failure by FRANCHISEE to obtain execution of a covenant required by this Section will constitute a default under Section 14.2.

Source: Item 23 — Receipts (FDD pages 53–163)

Question 41

Is boiler machinery insurance required for a Gold Star restaurant, and under what condition?

Accepted Answer

criteria for supplier approval available to Franchisees.

#### Insurance.

Before opening your Restaurant, you must obtain, and maintain at all times during the term of your franchise agreement, the following insurance coverage:

![](_page_22_Picture_0.jpeg)

- Special Perils Insurance including theft on the Restaurant to include but not limited to all furniture, fixtures, equipment, signs (attached and unattached), exterior glass, supplies and other property used in the operation of the Restaurant (including flood and/or earthquake coverage where applicable,) for the full repair and replacement value with no coinsurance clause or applicable agreed amount.
- Boiler machinery insurance, provided any Building on the Premises contains equipment of the nature ordinarily covered by such a policy
- Flood Insurance if any material portion of the Premises is located in an area identified in the Federal Register by the Federal Emergency Management Agency as having special flood hazards
- Plate glass insurance Covering the glass in the Premises.
- Commercial General Liability Insurance covering claims for bodily injury, property damage and personal injury, death, property and fire damage, and other damaging or injurious occurrences, with a minimum per occurrence limit of \$1,000,000, \$1,000,000 liquor liability per occurrence if applicable and a minimum general aggregate limit of \$2,000,000.
- Commercial Umbrella \$1,000,000 per occurrence, \$1,000,000 aggregate. \$5,000,000 per occurrence if liquor liability is applicable.
- Products/Completed Operations Aggregate with a minimum coverage of \$2,000,000.
- Business Interruption Insurance for actual losses sustained or 12 months.
- Worker's Compensation Insurance and Employer's Liability (STOP GAP) that complies with the statutory requirements of the state in which the Restaurant is located and Employers' Liability Insurance with a minimum limit equal to or greater than the statutory minimum limit required by state law.
- Automotive \$1,000,000 Combined Single Limit (CSL) for hired and non-owned automobiles.
- Any other insurance coverage that may be required by your lease.
- Recommended: Employment Practices Liabil

Source: Item 8 — Restrictions on Sources of Products and Services (FDD pages 21–25)

Question 42

Does Gold Star charge a fee for mandatory refresher or additional training programs?

Accepted Answer

- **2.4 Additional Training**. The COMPANY may at its option make available, or require attendance at, refresher or other additional training programs as it deems appropriate. No fee shall be charged by the COMPANY for any such training program at which attendance of FRANCHISEE or any other representative of FRANCHISEE designated by the COMPANY is mandatory. FRANCHISEE must pay the COMPANY for attendance of any optional attendee at any mandatory program and for attendance of any attendee at any optional training program made available by the COMPANY the standard fee then charged by the COMPANY to other Restaurant franchisees for such programs.
- **2.5 Expenses**. It is understood that FRANCHISEE shall receive no compensation or reimbursement for any services performed or expenses incurred by FRANCHISEE or any employee or other representative of FRANCHISEE during any training program and FRANCHISEE shall be responsible for all travel, lodging, meals and other related or incidental expenses incurred by FRANCHISEE, and FRANCHISEE's employees and representatives, in connection with any such program.
- **2.6 Compliance**. FRANCHISEE shall be responsible for the compliance of Store operations with the System and this Agreement and for training or causing FRANCHISEE's employees and any future new employees to be trained in such standards, methods, techniques, operations or other matters as are relevant to the performance of their respective duties in accordance with the System or as required by the COMPANY, the form and substance of such training to be satisfactory to the COMPANY.

Source: Item 23 — Receipts (FDD pages 53–163)

Question 43

Does the Gold Star company have to give consent to a franchise transfer if the franchisee is in default?

Accepted Answer

ange or changes in the Transfer terms and the COMPANY considers such change or changes material, the COMPANY shall again have the right of first refusal herein provided. The COMPANY's right of first refusal shall be unrestricted and absolute, and the COMPANY shall in all cases have thirty (30) days to consider and act on each offer or any change in terms and conditions of offer. Nothing contained in this Section shall in any way be deemed to impair the COMPANY's discretion in considering, approving or disapproving any request to Transfer or to consent to a Transfer.

- **13.4 Company's Non-Exercise**. If the COMPANY elects not to exercise such first right of refusal, such sale or transfer shall not take place without the prior written consent of the COMPANY. The COMPANY shall not be required to give its consent unless, in addition to the requirements of Section 17, the following conditions are met prior to the consummation of the Transfer:
  - **13.4.1** FRANCHISEE is not in default of this Agreement, or any other agreement with the COMPANY, or its affiliates, and all of its accrued monetary obligations to the COMPANY or its affiliates have been satisfied;
  - **13.4.2** The transferor, and its shareholders, members and partners, have executed a general release, in form and substance satisfactory to the COMPANY (and if applicable, conforming to requirements of local Franchise Law, as such term is defined in Section 22.1, below), of any and all claims against the COMPANY, its affiliates, shareholders, directors, officers and employees;
  - **13.4.3** The transferee has demonstrated to the COMPANY's satisfaction that it meets all of the COMPANY's then-current requirements for new operators or for holders of an interest in a franchise, including, without limitation, possession of good moral character and reputation, satisfactory credit ratings, acceptable business qualifications, satisfactory completion of training programs, and the ability to comply fully with the terms of the then-current franchise agreement;
  - **13.4.4**

Source: Item 23 — Receipts (FDD pages 53–163)

Question 44

What condition must be met for a Gold Star franchisee to pay a $10,000 initial franchise fee when opening a new restaurant?

Accepted Answer

nchise agreements with the COMPANY, an initial franchise fee in the amount of Fifty Thousand Dollars (\$50,000.00);
  - **8.1.2** If FRANCHISEE is opening a New Restaurant and FRANCHISEE is currently party to at least one (1) and less than five (5) franchise agreements with the COMPANY

Source: Item 23 — Receipts (FDD pages 53–163)

Question 45

What condition must be met for each provision of the Gold Star Chili addendum to be effective in Indiana?

Accepted Answer

- 4. Each provision of this Addendum shall be effective only to the extent, with respect to such provision, that the jurisdictional requirements of the Indiana Franchise Disclosure Law, Indiana Code §§ 23-2-2.5-1 to 23-2-2.5-51 and the Indiana Deceptive Franchise Practices Act, Indiana Code §§ 23-2-2.7-1 to 23-2-2.7-7, are met independently without reference to this Amendment.

Source: Item 23 — Receipts (FDD pages 53–163)

Question 46

What is the consequence if a Gold Star franchisee agrees to return goods after cancellation but fails to do so?

Accepted Answer

Section 6.7 notwithstanding, if FRANCHISEE fails to meet its obligations under Sections 6.8 and 6.9 with respect to any particular event, the COMPANY's warranties and obligations under Sections 6.7 and 6.8 shall become void with respect to such particular event, and the COMPANY shall have no liability for costs incurred or damages awarded against FRANCHISEE. **EXCEPT AS SPECIFICALLY SET FORTH IN SECTION 6.8, ABOVE, THE COMPANY SHALL NOT BE LIABLE TO FRANCHISEE FOR ANY DAMAGES, COSTS, OR EXPENSES WHATSOEVER, INCLUDING BUT NOT LIMITED TO, ANY LOSS OF PROFITS OR BUSINESS OPPORTUNITIES, OR INCIDENTAL OR CONSEQUENTIAL DAMAGES OF ANY KIND WHATSOEVER RELATING TO ANY ACTION OR OTHER MATTER INVOLVING THE MARKS OR GOODWILL ASSOCIATED THEREWITH.**

Source: Item 23 — Receipts (FDD pages 53–163)

Question 47

What is the consequence if a Gold Star franchisee fails to use the designated Point of Sale (POS) system?

Accepted Answer

**8.3.1** FRANCHISEE will pay continuing franchise fees and Brand Building Fees or any other amounts owed to the COMPANY (or its designee) under this Agreement or any other agreement by pre-authorized electronic debit from FRANCHISEE's bank or other financial institution account. On or before Tuesday of each week, the COMPANY or a designated third party supplier will unilaterally obtain FRANCHISEE's weekly sales information directly from FRANCHISEE's POS system for the preceding week ending on Sunday. In the event the COMPANY or its designated third party supplier is unable to directly obtain FRANCHISEE's weekly sales information for whatever reason, the COMPANY will notify FRANCHISEE and FRANCHISEE will provide to the COMPANY no later than Thursday the weekly sales report or such other information as the COMPANY may require, in a form prescribed by the COMPANY and certified by FRANCHISEE or by the designated individual, accurately reflecting FRANCHISEE's Gross Sales for the preceding week ending on Sunday. The amount of continuing franchise fees and Brand Building Fees due thereon will be calculated based on FRANCHISEE's Gross Sales report that has been obtained through the COMPANY's automated process or, alternatively, if the COMPANY or its designated third party supplier was unable to obtain the report from FRANCHISEE's POS system, and FRANCHISEE was thereby required to provide the weekly sales report manually, the amount of continuing franchise fees and Brand Building Fees shall be calculated based on the report submitted by FRANCHISEE. Each Tuesday, the COMPANY will debit FRANCHISEE's account in an amount equal to the continuing franchise fees and Brand Building Fees reported payable by FRANCHISEE and any amounts owed to the COMPANY under this Agreement or any other agreement. If FRANCHISEE fails to timely report its Gross Sales to the COMPANY by Thursday for any weekly reporting period, then the COMPANY will be authorized to debit FRANCHISEE's account in an amount equal to an average of the continuing franchise fees and Brand Building Fees payable by FRANCHISEE during the immediately preceding three-month period (or such shorter period as the Store has been in operation) for which weekly sales reports were received. FRANCHISEE is responsible for ensuring accuracy of the Gross Sales figure that is used for calculation of continuing franchise fees and Brand Building Fees. Nothing in this paragraph is to be construed to waive

Source: Item 23 — Receipts (FDD pages 53–163)

Question 48

What is the cost threshold that triggers the extended refurbishment deadline for a Gold Star franchise?

Accepted Answer

products is recognized in the period in which distributors ship the order; recognition of revenue (point in time) results in accounts receivable on the consolidated balance sheets.

#### NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

In determining the amount and timing of revenue from contracts with customers, the Company exercises significant judgment with respect to collectability of the amount. However, the timing of recognition does not require significant judgments as it is based on either the franchise term or the mo

Source: Item 23 — Receipts (FDD pages 53–163)

Question 49

What is the dependency between the Gold Star franchise agreement term and the lease for the Retail Location?

Accepted Answer

The term of this Agreement and the franchise granted herein shall be for a term of ten (10) years, or, if less, the term of the lease for the Retail Location (the term is set forth on the cover page of this Agreement) or until otherwise terminated as hereinafter provided; provided FRANCHISEE has secured, and continues to secure, by ownership or lease, the Retail Location for the same term.

Source: Item 23 — Receipts (FDD pages 53–163)

Question 50

What is the duration of the Gold Star franchise agreement if it is less than ten years?

Accepted Answer

The term of this Agreement and the franchise granted herein shall be for a term of ten (10) years, or, if less, the term of the lease for the Retail Location (the term is set forth on the cover page of this Agreement) or until otherwise terminated as hereinafter provided; provided FRANCHISEE has secured, and continues to secure, by ownership or lease, the Retail Location for the same term.

Source: Item 23 — Receipts (FDD pages 53–163)

Question 51

What is the first condition a Gold Star franchisee must meet to maintain protected territory rights?

Accepted Answer

The COMPANY agrees not to operate or license another to operate a Restaurant within the territory defined on the cover page hereof (the "Protected Territory") so long as FRANCHISEE: (i) fully complies with all methods, procedures, standards and specifications required by the COMPANY in the Manual (defined in Section 3.3 below) or otherwise in writing; and (ii) does not violate any of the other provisions of this Agreement or has cured such violation in the time period provided for herein.

Source: Item 23 — Receipts (FDD pages 53–163)

Question 52

Is flood and/or earthquake coverage required as part of the special perils insurance for a Gold Star restaurant, and under what condition?

Accepted Answer

Before opening your Restaurant, you must obtain, and maintain at all times during the term of your franchise agreement, the following insurance coverage:

![](_page_22_Picture_0.jpeg)

- Special Perils Insurance including theft on the Restaurant to include but not limited to all furniture, fixtures, equipment, signs (attached and unattached), exterior glass, supplies and other property used in the operation of the Restaurant (including flood and/or earthquake coverage where applicable,) for the full repair and replacement value with no coinsurance clause or applicable agreed amount.
- Boiler machinery insurance, provided any Building on the Premises contains equipment of the nature ordinarily covered by such a policy
- Flood Insurance if any material portion of the Premises is located in an area identified in the Federal Register by the Federal Emergency Management Agency as having special flood hazards

Source: Item 8 — Restrictions on Sources of Products and Services (FDD pages 21–25)

Question 53

Is flood insurance required for a Gold Star restaurant, and under what condition?

Accepted Answer

criteria for supplier approval available to Franchisees.

#### Insurance.

Before opening your Restaurant, you must obtain, and maintain at all times during the term of your franchise agreement, the following insurance coverage:

![](_page_22_Picture_0.jpeg)

- Special Perils Insurance including theft on the Restaurant to include but not limited to all furniture, fixtures, equipment, signs (attached and unattached), exterior glass, supplies and other property used in the operation of the Restaurant (including flood and/or earthquake coverage where applicable,) for the full repair and replacement value with no coinsurance clause or applicable agreed amount.
- Boiler machinery insurance, provided any Building on the Premises contains equipment of the nature ordinarily covered by such a policy
- Flood Insurance if any material portion of the Premises is located in an area identified in the Federal Register by the Federal Emergency Management Agency as having special flood hazards
- Plate glass insurance Covering the glass in the Premises.
- Commercial General Liability Insurance covering claims for bodily injury, property damage and personal injury, death, property and fire damage, and other damaging or injurious occurrences, with a minimum per occurrence limit of \$1,000,000, \$1,000,000 liquor liability per occurrence if applicable and a minimum general aggregate limit of \$2,000,000.
- Commercial Umbrella \$1,000,000 per occurrence, \$1,000,000 aggregate. \$5,000,000 per occurrence if liquor liability is applicable.
- Products/Completed Operations Aggregate with a minimum coverage of \$2,000,000.
- Business Interruption Insurance for actual losses sustained or 12 months.
- Worker's Compensation Insurance and Employer's Liability (STOP GAP) that complies with the statutory requirements of the state in which the Restaurant is located and Employers' Liability Insurance with a minimum limit equal to or greater than the statutory minimum limit required by state law.
- Automotive \$1,000,000 Combined Single Limit (CSL) for hired and non-owned automobiles.
- Any other insurance coverage that may be required by your lease.
- Recommended: Employment Practices Liabil

Source: Item 8 — Restrictions on Sources of Products and Services (FDD pages 21–25)

Question 54

In the Gold Star franchise agreement, what happens if the franchisee defaults?

Accepted Answer

he purchase of assets under Section 15.2 above.
- **15.4 No Right to Use Marks**. As agreed to in Section 6 of this Agreement, all rights to any Marks, patents and copyrights licensed hereunder belong to the COMPANY exclusively, and upon expiration or termination of this Agreement, the COMPANY may, if FRANCHISEE does not do so, execute in FRANCHISEE's name, at FRANCHISEE's expense and on FRANCHISEE's behalf any and all documents necessary to end and cause the discontinuance immediately of FRANCHISEE's use of or right to use the Marks, patents and copyrights and the COMPANY is hereby irrevocably appointed and designated as FRANCHISEE's attorney-in-fact to do so.

![](_page_97_Picture_0.jpeg)

- **15.5 Right of Entry; Appointment of Receiver**. If FRANCHISEE is in default under the terms of this Agreement, in addition to the COMPANY's right to terminate this Agreement, and without limiting any other rights or remedies to which the COMPANY may be entitled at law or in equity, the COMPANY will have the right to take any of the following actions:
  - **15.5.1** enter upon the premises of the Franchised Restaurant and exercise complete authority with respect to the operation of the Store until such time as the COMPANY determines, in its sole discretion, that FRANCHISEE has cured the default and that there is compliance with the terms of this Agreement; and FRANCHISEE agrees that a designated representative of the COMPANY may operate and control the Store, and that FRANCHISEE will pay the COMPANY for its labor costs, travel expenses, lodging and other expenses reasonably incurred by the - COMPANY in sending a representative to enforce compliance with the terms of this Agreement; or
  - **15.5.2** petition any court of competent jurisdiction to appoint a receiver for the business or assets of FRANCHISEE, and FRANCHISEE agrees that it will not contest any proceeding or petition for the appointment of a receiver.
- **15.6 Liquidated Damages**. If FRANCHISEE abandons or discontinues the franchise for any reason prior to the expiration of the term of this Agreement, FRANCHISEE will pay to the COMPANY as liquidated damages and not as a penalty, and in addition to but not in limitation of any other rights and remedies to which the COMPANY is entitled, an amount equal to the average monthly continuing franchise fee payments due from FRANCHISEE during the twelve months preceding the abandonment or discontinuance of the franchise, multiplied by the lesser of twenty-four or the number of months remaining in the term of this Agreement.

#### **16. RENEWAL.**

**16.1 Renewal Option**.

Source: Item 23 — Receipts (FDD pages 53–163)

Question 55

Does the Gold Star franchise agreement require the franchisee to actively seek a new location if rebuilding is prohibited?

Accepted Answer

- **1.5 Relocation**. If FRANCHISEE desires to move its Store to another location during the term of this Agreement (including but not limited to a desire to move because FRANCHISEE's lease, or any extension or renewal thereof, terminates during the term of this Agreement through no fault of FRANCHISEE), FRANCHISEE must apply for and be granted approval to relocate (the COMPANY is not obligated to grant such approval) and to purchase a franchise for a different location, must satisfactorily complete the site selection process and must sign and comply with the COMPANY's then current form of franchise agreement, including but not limited to the fee (including initial, weekly, advertising and other fees), appearance, design, lease and other requirements thereof. If FRANCHISEE's lease, or any extension or renewal thereof, terminates during the term of this Agreement due to any fault of FRANCHISEE, this Agreement shall terminate at the option of the COMPANY upon written notice from the COMPANY.

Source: Item 23 — Receipts (FDD pages 53–163)

Question 56

Does the Gold Star franchise agreement require the franchisee to comply with all other terms of the agreement while seeking a new location?

Accepted Answer

- **1.5 Relocation**. If FRANCHISEE desires to move its Store to another location during the term of this Agreement (including but not limited to a desire to move because FRANCHISEE's lease, or any extension or renewal thereof, terminates during the term of this Agreement through no fault of FRANCHISEE), FRANCHISEE must apply for and be granted approval to relocate (the COMPANY is not obligated to grant such approval) and to purchase a franchise for a different location, must satisfactorily complete the site selection process and must sign and comply with the COMPANY's then current form of franchise agreement, including but not limited to the fee (including initial, weekly, advertising and other fees), appearance, design, lease and other requirements thereof. If FRANCHISEE's lease, or any extension or renewal thereof, terminates during the term of this Agreement due to any fault of FRANCHISEE, this Agreement shall terminate at the option of the COMPANY upon written notice from the COMPANY.
- **1.6 Permitted Activities**. FRANCHISEE shall engage at the Retail Location only in the business of operating the Store and only pursuant to the System and this Agreement. FRANCHISEE shall not engage in the Business at any other location, provided that FRANCHISEE shall be permitted to make delivery orders with its own employees in the Protected Territory so long as FRANCHISEE abides by COMPANY's policies and procedures then in effect with respect to delivery services. FRANCHISEE shall not manufacture, sell, advertise for sale, provide or give away any products or services at the Retail Location other than the products and services designated or approved from time to time by the COMPANY in the Manual or otherwise in writing (collectively the "Products"). The conditions expressed herein are for the purpose of ensuring quality control and uniformity.

Source: Item 23 — Receipts (FDD pages 53–163)

Question 57

Does the Gold Star franchise agreement require the franchisee to defend the company against claims?

Accepted Answer

Except for: (i) claims against FRANCHISEE concerning the underreporting of Gross Sales and corresponding underpayment of continuing franchise and Brand Building Fees, (ii) claims against FRANCHISEE by The COMPANY relating to third party claims or suits brought against The COMPANY as a result FRANCHISEE's operation of the Store, (iii) claims for injunctive relief to enforce the provisions of this Agreement relating to FRANCHISEE's use of the Marks, (iv) claims against FRANCHISEE by The COMPANY for injunctive relief relating to FRANCHISEE's financial obligations upon the termination or expiration of this Agreement, (v) claims against FRANCHISEE by The COMPANY concerning FRANCHISEE's obligations under Articles 11 or 12 of this Agreement, and (vi) claims against FRANCHISEE by The COMPANY regarding an assignment of this Agreement or any ownership interests therein, any and all claims arising out of or relating to this Agreement or the relationship between the parties will be barred unless an action is commenced within one year from the date FRANCHISEE or The COMPANY knew or should have known of the facts giving rise to such claims.

Source: Item 23 — Receipts (FDD pages 53–163)

Question 58

Does the Gold Star Franchise Disclosure Document include an addendum specific to the state of Indiana?

Accepted Answer

)         |
| I mancing Activities                     | _   | (1,304,320)              | -   | (703,003)                 |    | 203,000      | (141,002)    |   | (2,303,193)         |
| Net Change in Cash                       |     | 269,087                  |     | (10,532)                  |    | 113,759      | -            |   | 372,314             |
| Beginning Cash Balance                   | _   | 168,180                  | _   | 919,907                   |    | 130,561      |              |   | 1,218,648           |
| Ending Cash Balance                      | \$_ | 437,267                  | \$_ | 909,375                   | \$ | 244,320 \$   | \$           | · | 1,590,962           |

![](_page_155_Picture_0.jpeg)

![](_page_156_Picture_0.jpeg)

#### **EXHIBIT G to FRANCHISE DISCLOSURE DOCUMENT**

#### **STATE ADMINSTRATORS**

#### INDIANA

Secretary of State of the State of Indiana Indiana Securities Division 302 West Washington Street Room E-111 Indianapolis, IN 46204

#### KENTUCKY

Attorney General of the Commonwealth of Kentucky Consumer Protection Division 1024 Capital Center Drive, Suite 200 Frankfort, KY 40601

#### OHIO

Attorney General of the State of Ohio Consumer Protection Section 30 E. Broad Street, 14th Floor Columbus, Ohio 43215

![](_page_157_Picture_0.jpeg)

#### **EXHIBIT H to FRANCHISE DISCLOSURE DOCUMENT**

#### **ADDENDUM TO THE GOLD STAR CHILI FRANCHISE AGREEMENT REQUIRED BY THE STATE OF INDIANA**

In recognition of the requirements of the Indiana Disclosure Law, Indiana Code §§ 23-2- 2.5-1 to 23-2-2.5-51 and the Indiana Deceptive Franchise Practices Act, Indiana Code §§ 23-2- 2.7-1 to 23-2-2.7-7, the parties to the attached Gold Star Chili, Inc. Franchise Agreement (the "Agreement") agree as follows:

- 1. Section 1 of the Agreement, under the heading "Grant of Franchise," shall be supplemented by the following subsection 1.7, which shall be considered an integral part of the Agreement:
  - "C. No Unfair Competition. Licensor agrees that it shall not compete unfairly with Licensee within a reasonable area surrounding the approved location of the licensed location."
- 2. Section 22.1 of the Agreement shall be deleted in its entirety, and shall have no force or effect; and the following shall be substituted in lieu thereof:

"Except to the extent governed by the United States Trademark Act of 1946 (Lanham Act, 15 U.S.C. §§ 1051 et seq.), other applicable federal law, or, the Indiana Franchise Disclosure Law or the Indiana Deceptive Franchise Practices Act, this Agreement was accepted and executed in the State of Ohio and its terms shall be construed in accordance with and governed by laws of the State of Ohio. In the event of any conflict of any clause in this Agreement with any mandatory applicable provisions of the Franchise Laws or other laws of the state wherein the Store is located such clause shall be considered modified to the extent, and only to the extent, necessary to conform with such mandatory provisions of that state's laws. As stated in this Agreement, the term "Franchise Law" means any mandatory provision of the law of any state which specifically regulates the offer, sale, termination, renewal or other specific aspects of franchises and does not mean the general laws other than such specific franchise act.

Source: Item 23 — Receipts (FDD pages 53–163)

Question 59

For a Gold Star franchisee, what constitutes a 'Similar Business' if a court modifies the restrictions in Section 11?

Accepted Answer

ed liability company; and (3) all general partners of FRANCHISEE (including any corporation, and the officers, directors, and holders of a beneficial interest of 5% or more of the securities of any corporation which controls, directly or indirectly, any general partner), if FRANCHISEE is a partnership (collectively, "Related Parties"). Every covenant required by this Section 11 will be in a form satisfactory to the COMPANY. Failure by FRANCHISEE to obtain execution of a covenant required by this Section will constitute a default under Section 14.2.
- **11.3 Duration of Covenants**. If FRANCHISEE fails to abide by the foregoing covenants and the COMPANY obtains enforcement thereof in a judicial proceeding, FRANCHISEE agrees that the foregoing covenant shall continue to be binding for a period of time expiring three (3) years after the later of the conclusion of such proceedings or the date of a legally binding order enforcing the foregoing covenants. If any court having jurisdiction to determine the enforceability or validity of any of this Section 11 determines that any provision hereof would be unenforceable or invalid as written, the definition of "Similar Business" and the geographical, time and other restrictions shall be deemed modified only to the extent necessary to make such restrictions valid and enforceable.
- **11.4 No Defense**. No claim which FRANCHISEE or any Related Party may have against the COMPANY, whether or not arising from this Agreement, shall

![](_page_86_Picture_0.jpeg)

constitute a defense to the enforcement by the COMPANY of the foregoing covenants.

#### **12. CONFIDENTIALITY.**

- **12.1 Confidential Material**.

Source: Item 23 — Receipts (FDD pages 53–163)

Question 60

Is a Gold Star franchisee necessarily licensed to use the copyrights asserted by Gold Star?

Accepted Answer

Gold Star asserts copyright protection for its Manual and other information and materials regarding Gold Star's System, which are not registered. You are not necessarily licensed to use these copyrights, but you are licensed to use the Manual and certain confidential information and materials during the term of the Franchise Agreement as part of the Confidential Material described in this Item 14.

Source: Item 14 — Patents, Copyrights, and Proprietary Information (FDD pages 40–41)

Question 61

Must a Gold Star franchisee use an attorney acceptable to Gold Star for the purchase or leasing of the Retail Location?

Accepted Answer

You must use a real estate broker, architect, general contractor and, if applicable, civil engineer and attorney acceptable to Gold Star for the purchase or leasing of the Retail Location and the construction of your franchised Restaurant.

Source: Item 8 — Restrictions on Sources of Products and Services (FDD pages 21–25)

Question 62

Must a Gold Star franchisee use a civil engineer acceptable to Gold Star for the purchase or leasing of the Retail Location?

Accepted Answer

You must use a real estate broker, architect, general contractor and, if applicable, civil engineer and attorney acceptable to Gold Star for the purchase or leasing of the Retail Location and the construction of your franchised Restaurant.

Source: Item 8 — Restrictions on Sources of Products and Services (FDD pages 21–25)

Question 63

What happens if the Company owes Gold Star royalty and advertising fees that are past due?

Accepted Answer

ents Unconditional**. All amounts payable by FRANCHISEE to the COMPANY or any affiliate under or in connection with this Agreement shall be made without set-off or deduction for any reason whatsoever (including but not limited to any alleged breach by the COMPANY of any obligations to FRANCHISEE), and if not paid when due shall bear interest from the date due until paid at the rate of one and one-half percent (1.5%) per month, or the maximum rate permitted by law, whichever is less. Any payment not made when due also shall be subject to a late payment administrative charge of One Hundred Dollars (\$100). Entitlement to such interest and charge shall be in addition to the COMPANY's right to terminate this Agreement and any other remedies the COMPANY may have with respect to such late payment.
- **8.5 Company's Sole Discretion**. Notwithstanding any designation by FRANCHISEE, the COMPANY shall have sole discretion to apply any payments by FRANCHISEE to any past due obligations of FRANCHISEE to the

![](_page_79_Picture_0.jpeg)

- COMPANY or its affiliates in such manner and order as the COMPANY deems appropriate in its sole discretion.
- **8.6 Company's Security Interest**. FRANCHISEE hereby grants the COMPANY a first priority security interest in all inventories, supplies and equipment of FRANCHISEE and any items sold by the COMPANY to FRANCHISEE in order to secure the payment of any of FRANCHISEE's obligations to the COMPANY. FRANCHISEE will execute all documents required to effectuate and perfect the COMPANY's security interest, and if FRANCHISEE does not do so, the COMPANY may execute the documents in FRANCHISEE's name and on FRANCHISEE's behalf, and FRANCHISEE irrevocably appoints the COMPANY as FRANCHISEE's attorney-in-fact to do so.
- **8.7 Gross Sales**.

Source: Item 23 — Receipts (FDD pages 53–163)

Question 64

What happens if a Gold Star franchisee violates the franchise agreement?

Accepted Answer

- **14.5.1** FRANCHISEE fails to make or cause to make any payment of any Brand Building Fee, continuing franchise fee or other fee or payment due hereunder, and FRANCHISEE fails to cure such failure to pay within 10 days after the COMPANY's written notice thereof;
- **14.5.2** FRANCHISEE (or any Related Party) breaches any term or condition of (a) this Agreement (except to the extent covered by Section 14.3 or 14.4); or (b) any term or condition of any other agreement or obligation with the COMPANY or its affiliates;
- **14.5.3** FRANCHISEE fails to sell Products of the highest quality or otherwise fails to comply with the COMPANY's standards;
- **14.5.4** FRANCHISEE or the Retail Location fails any inspection performed by COMPANY herein;
- **14.5.5** FRANCHISEE defaults under or fails to perform any term or condition of any Lease, mortgage, deed of trust or other agreement covering the Business or the Retail Location;

Source: Item 23 — Receipts (FDD pages 53–163)

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