What acknowledgement does the Gold Star franchisee make regarding the reasonableness of the restrictive covenants?
Gold_Star Franchise · 2025 FDDAnswer from 2025 FDD Document
- 11.1 Restrictive Covenants. FRANCHISEE and any present and future partners, shareholders, or members acknowledge that the Products and the System are unique and distinctive and have been developed by the COMPANY at great effort, time and expense, and that FRANCHISEE will have regular and continuing access to valuable and confidential information, training and trade secrets regarding the Proprietary Products, the System and the Business and that FRANCHISEE would not have had such access except as a result of entering into this Agreement.
In consideration of the foregoing, FRANCHISEE agrees that:
- 11.1.1 During the term of this Agreement or any renewal or extension thereof, FRANCHISEE shall not, in any capacity whatsoever, either directly or indirectly, for itself, himself or herself, or through, on behalf of or in conjunction with any other person, partnership, limited liability company, corporation or organization, own, operate, maintain, engage in, participate in (as director, officer, manager, employee, consultant, representative, agent or otherwise) or have any interest whatsoever in any "Similar Business".
As used herein, "Similar Business" means the production, preparation or sale of any food items similar to the Products or any other business similar to the Restaurants, the Business or the System or that offers or grants franchises or licenses to others to operate such a business.
- 11.1.2 During the term of this Agreement and all extensions of renewal thereof and for three (3) years thereafter, FRANCHISEE shall not let or permit any part of any premises owned or controlled by FRANCHISEE in the Protected Territory to be used for a business, all or any part of which consists of a Similar Business.
Source: Item 23 — Receipts (FDD pages 53–163)
What This Means (2025 FDD)
According to the 2025 Gold Star Franchise Disclosure Document, the franchisee acknowledges that the products and system are unique and were developed by Gold Star at great effort, time, and expense. The franchisee recognizes they will have regular access to valuable and confidential information, training, and trade secrets regarding proprietary products, the system, and the business. This access is contingent upon entering into the Franchise Agreement.
In consideration of this access, the franchisee agrees not to engage in any "Similar Business" during the term of the agreement, including any extensions or renewals. A "Similar Business" is defined as the production, preparation, or sale of food items similar to Gold Star's products or any business similar to the restaurants, the business, or the system. This also includes offering or granting franchises or licenses to others to operate such a business.
Furthermore, during the term of the agreement and for three years after, the franchisee cannot allow any premises they own or control within the Protected Territory to be used for a business that consists of a Similar Business. These restrictive covenants are in place to protect Gold Star's business model, trade secrets, and market position by preventing franchisees from directly competing with the brand during and for a limited time after the franchise agreement.