Does the Gold Star agreement define 'Related Parties'?
Gold_Star Franchise · 2025 FDDAnswer from 2025 FDD Document
- 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)
What This Means (2025 FDD)
According to Gold Star's 2025 Franchise Disclosure Document, the franchise agreement does define "Related Parties" in Section 11.2. This definition is important because certain individuals connected to the franchisee may be required to sign covenants similar to those in Section 11, including non-compete agreements, upon Gold Star's request.
Specifically, "Related Parties" include: (1) all managers, officers, and directors of the franchisee; (2) all holders of a beneficial interest of 5% or more of the securities of the franchisee or any entity controlling the franchisee, if the franchisee is a corporation or limited liability company; and (3) all general partners of the franchisee, including officers, directors, and holders of 5% or more of the securities of any corporation that controls any general partner, if the franchisee is a partnership.
The agreement stipulates that these covenants must be in a form satisfactory to Gold Star. Failure by the franchisee to obtain these signed covenants from Related Parties constitutes a default under Section 14.2 of the franchise agreement. This means a prospective franchisee needs to be aware that key individuals associated with their business will be subject to these covenants and must comply with Gold Star's requirements.