What are considered 'Restricted Assets' in the Gold Star franchise agreement that cannot be transferred without consent?
Gold_Star Franchise · 2025 FDDAnswer from 2025 FDD Document
pany**. This Agreement shall inure to the benefit of the COMPANY and its successors and assigns. The COMPANY may sell, transfer or assign this Agreement and any rights or duties hereunder to any third party at any time, and upon the giving of written notice to FRANCHISEE of any such transfer, COMPANY will have no further responsibility for the performance of any of the transferred obligations. FRANCHISEE shall execute any forms that the COMPANY may reasonably require in connection with any transfer or assignment by the COMPANY.
- 13.2 No Assignment by Franchisee. The COMPANY has granted this franchise in reliance on the individual or collective character, skill, aptitude and business and financial capacity of FRANCHISEE and its Principals. Accordingly, neither FRANCHISEE nor any person with an interest in FRANCHISEE shall (directly or indirectly, contingently, voluntarily, involuntarily, by contract, by will, by merger or consolidation, by transfer or issuance of stock, membership or partnership interests, by operation of law or otherwise), without the prior written consent of the COMPANY, sell, assign, transfer, convey, issue, lease, pledge, mortgage, encumber or make any disposition of in any manner (collectively, "Transfer"), or permit the Transfer of, or publicly advertise or offer any Transfer of, all or any part of any of the following or any interest therein (collectively the "Restricted Assets"): this Agreement, the Business, the Store, the Retail Location (whether owned or leased), any Lease, any interest or share in FRANCHISEE which results in a Change-in-Control (defined below), or all or a material part of the assets, real or personal, tangible or intangible, pertaining to the Store or the Business. A "Change-in-Control" transaction or series of transactions shall occur when 50% or more of the voting power of FRANCHISEE is vested in a person or persons (as applicable) different from the person or persons (as applicable) with whom 50% of voting power was vested immediately prior to the transaction or series of transactions. For purposes of this subparagraph, all transfers of an ownership interest in a nonindividual franchisee occurring since the date the entity first became a franchisee will be aggregated to determine whether a Change-in-Control has occurred.
- 13.3 Company's Right of First Refusal. Notwithstanding anything contained in this Agreement to the contrary, if FRANCHISEE or any Principal wishes to Transfer or accept an offer to Transfer, in any manner whatsoever, all or any part of any of the Restricted Assets, or any interest therein, FRANCHISEE or its Principals, as the case may be, will first obtain a bona fide, executed, written offer from a fullydisclosed purchaser and will submit an exact copy thereof to the COMPANY.
Source: Item 23 — Receipts (FDD pages 53–163)
What This Means (2025 FDD)
According to Gold Star's 2025 Franchise Disclosure Document, several assets are designated as 'Restricted Assets,' and franchisees need prior written consent from Gold Star to transfer them. These assets include the franchise agreement itself, the Gold Star business, the physical store location, whether owned or leased, and any associated lease agreements. Additionally, any interest or share in the franchisee's business that would result in a change of control, defined as a transaction where 50% or more of the voting power changes hands, is also considered a restricted asset. This also applies to all or a material part of the assets, real or personal, tangible or intangible, pertaining to the Store or the Business.
This restriction means a Gold Star franchisee cannot sell the business, transfer the lease, or sell a controlling stake in their franchise without first getting approval from Gold Star. This provision allows Gold Star to maintain control over who operates its franchises and ensures that new operators meet their standards. It also protects the brand by preventing transfers to individuals or entities that may not be suitable franchisees.
However, there is an exception: a franchisee (if an individual) can transfer their interest in the Restricted Assets to an entity formed solely for ownership convenience without Gold Star's consent, provided they give written notice and meet specific requirements. These requirements include that the new entity's activities are confined to operating the business, the entity's name does not include "Gold Star Chili" or any similar mark, and the franchisee and its principals comply with all requirements outlined in Section 17 of the franchise agreement. This exception provides some flexibility for franchisees to structure their business ownership while still adhering to Gold Star's transfer restrictions.
Prospective franchisees should carefully consider these transfer restrictions and discuss any potential exit strategies with Gold Star before signing the franchise agreement. Understanding these limitations is crucial for planning the future of their investment and ensuring compliance with the franchise agreement.