What constitutes a 'Change-in-Control' for a Gold Star franchise?

According to Gold Star's 2025 Franchise Disclosure Document, a "Change-in-Control" occurs when there is a shift in the voting power of the franchisee. Specifically, a change in control happens when 50% or more of the voting power of the franchisee is transferred to a person or persons different from those who held 50% of the voting power immediately before the transaction. This definition applies to a single transaction or a series of transactions.

For prospective Gold Star franchisees, this means that any transfer of ownership or equity that results in a new individual or group controlling more than half of the voting rights would be considered a change in control. Gold Star needs to approve such changes. This is important for franchisees who may consider selling a portion of their business or bringing in new partners, as it triggers the franchisor's approval process.

Furthermore, the FDD specifies that all transfers of ownership interest in a non-individual franchisee are aggregated from the date the entity first became a franchisee to determine if a change in control has occurred. This means that even smaller, incremental transfers can collectively trigger the change-in-control clause if they cumulatively exceed the 50% threshold. Franchisees need to maintain detailed records of all ownership transfers to ensure compliance with this provision.

This level of control is typical in franchising, as franchisors like Gold Star want to ensure that new controlling parties meet their standards and are capable of maintaining the brand's reputation and operational consistency. Franchisees should carefully consider these restrictions on transferability and consult with legal counsel to understand the implications before entering into a franchise agreement.