Does the Gold Star company have to give consent to a franchise transfer if the franchisee is in default?
Gold_Star Franchise · 2025 FDDAnswer from 2025 FDD Document
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)
What This Means (2025 FDD)
According to Gold Star's 2025 Franchise Disclosure Document, if a franchisee is in default of their franchise agreement, Gold Star does not have to consent to a transfer of the franchise. Gold Star retains the right to deny a transfer if the franchisee is in default of the agreement or any other agreement with Gold Star or its affiliates, and if all accrued monetary obligations to Gold Star or its affiliates have not been satisfied. This condition is in place to ensure that the new transferee meets Gold Star's standards and that all financial obligations are met before a transfer can occur.
In order for a transfer to occur, the franchisee must not be in default of any agreement with Gold Star or its affiliates, and all outstanding monetary obligations must be settled. Additionally, the transferor must execute a general release of claims against Gold Star, and the transferee must meet Gold Star's current requirements for new operators, including demonstrating good moral character, satisfactory credit ratings, acceptable business qualifications, and successful completion of training programs. The transferee must also agree to assume all of the franchisee's obligations under the existing agreement.
Furthermore, the transferee is required to pay Gold Star's then-current transfer fee. As of the date of the Franchise Agreement, the transfer fee is $3,500.00, but this amount is subject to change at Gold Star's discretion. This fee is standard in the franchise industry and is intended to cover the costs associated with reviewing and approving the transfer. The conditions outlined in the FDD ensure that Gold Star maintains control over who operates its franchises and that any new franchisee meets its standards for operation and financial stability.
In summary, a Gold Star franchisee's ability to transfer their franchise is contingent upon being in good standing with Gold Star, meeting all financial obligations, and ensuring the transferee is fully qualified and approved by Gold Star. These provisions protect Gold Star's brand and ensure consistency across its franchise network.