Does the Gold Star company have discretion in applying payments made by the franchisee?
Gold_Star Franchise · 2025 FDDAnswer from 2025 FDD Document
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
- COMPANY or its affiliates in such manner and order as the COMPANY deems appropriate in its sole discretion.
Source: Item 23 — Receipts (FDD pages 53–163)
What This Means (2025 FDD)
According to Gold Star's 2025 Franchise Disclosure Document, Gold Star has the sole discretion to apply payments made by the franchisee. Specifically, Gold Star can apply payments to any past due obligations the franchisee has to Gold Star or its affiliates. This discretion allows Gold Star to allocate payments in a manner it deems appropriate.
This provision means that even if a franchisee designates a payment for a specific purpose, Gold Star can override that designation and apply the payment to older, outstanding debts. This could include franchise fees, royalty payments, or other financial obligations the franchisee owes to Gold Star.
For a prospective franchisee, this clause highlights the importance of maintaining good financial standing with Gold Star. Failure to do so could result in payments intended for current obligations being diverted to cover past debts, potentially leading to further financial strain. Franchisees should ensure timely payments to avoid Gold Star exercising this discretion.