What collateral secures the note payable for Gold Star?
Gold_Star Franchise · 2025 FDDAnswer from 2025 FDD Document
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.
Source: Item 23 — Receipts (FDD pages 53–163)
What This Means (2025 FDD)
According to Gold Star's 2025 Franchise Disclosure Document, the note payable is secured by property and, where applicable, an assignment of rents. This means that if Gold Star is unable to meet its debt obligations under the note payable, the lender has a legal claim on Gold Star's properties and any rental income derived from those properties. This arrangement reduces the lender's risk, as they have assets they can seize and sell to recover their funds if Gold Star defaults on the loan.
For a prospective franchisee, this information is relevant because it provides insight into the financial obligations and security arrangements of the franchisor. While the franchisee is not directly liable for Gold Star's debt, the financial health of the franchisor can impact the support and services they provide to franchisees. If Gold Star were to face financial difficulties due to its debt obligations, it could potentially affect its ability to invest in marketing, training, or other resources that benefit franchisees.
It's important for potential franchisees to understand the financial stability of the franchisor, as it can influence the long-term success of their franchise investment. Reviewing the complete financial statements and understanding the implications of secured debt is a crucial part of the due diligence process. Prospective franchisees should consider consulting with a financial advisor to assess the risks and benefits associated with investing in a Gold Star franchise, given the franchisor's existing debt structure and collateral arrangements.