What constitutes a breach of confidentiality obligations for a Gold Star franchisee?
Gold_Star Franchise · 2025 FDDAnswer from 2025 FDD Document
- 14.4.2 Any provisions of Sections 11 or 12, regarding trade secrets, confidentiality and/or non-competition, are breached;
If FRANCHISEE discloses any Confidential Material to any person, firm or entity or otherwise breaches its obligations under this Section 12, or if one of the Related Parties or any other person subject to FRANCHISEE's control makes such a disclosure or otherwise breaches its obligations under this Section 12 as a result of the failure of FRANCHISEE to use its best efforts to take the necessary precautions to prevent such disclosure, then FRANCHISEE shall pay to the COMPANY for each and every breach of this covenant, the sum of One Hundred Thousand Dollars ($100,000) as liquidated damages and not as a penalty.
The parties acknowledge that the precise amount of COMPANY's actual damages would be extremely difficult to ascertain and that the foregoing sum represents a reasonable pre-estimate of such actual damages.
Nothing contained herein shall preclude the COMPANY from seeking injunctive or other relief.
Information contained in the Manual, and other information about the Proprietary Products, the System and the Business, including customer and supplier lists (the "Confidential Material") are proprietary, highly-confidential trade secrets and FRANCHISEE shall not use any such Confidential Material except as necessary in the operation of the Business in accordance with this Agreement.
FRANCHISEE further acknowledges and agrees that the COMPANY is the owner of all rights in and to the System, and the Confidential Material, and that the System and the Confidential Material constitute trade secrets of the COMPANY which are revealed to FRANCHISEE in confidence, and that no right is given to or acquired by FRANCHISEE to, and FRANCHISEE shall not, disclose, duplicate, license, sell or reveal any of such Confidential Material to any person, other than disclosure to an employee of FRANCHISEE to the extent required by his/her work in accordance with this Agreement to be familiar with relevant Confidential Material.
Source: Item 23 — Receipts (FDD pages 53–163)
What This Means (2025 FDD)
According to Gold Star's 2025 Franchise Disclosure Document, a franchisee breaches confidentiality obligations if any provisions of Section 12, regarding trade secrets and confidentiality, are violated. This includes disclosing confidential material to any person, firm, or entity. It also includes breaches by related parties or anyone under the franchisee's control if the franchisee fails to take necessary precautions to prevent such disclosure.
Confidential Material includes information in the Manual and other information about Proprietary Products, the System, and the Business, including customer and supplier lists. Franchisees must not use Confidential Material except when operating the business according to the Franchise Agreement. Gold Star owns all rights to the System and Confidential Material, which are considered trade secrets revealed to the franchisee in confidence.
If a franchisee breaches these confidentiality obligations, they must pay Gold Star $100,000 for each breach as liquidated damages, not as a penalty. This acknowledges that the precise amount of actual damages would be hard to determine. However, Gold Star can also seek injunctive or other relief to prevent further breaches or damages.