What constitutes a 'Transfer' of interest in a Gold Star franchise?
Gold_Star Franchise · 2025 FDDAnswer from 2025 FDD Document
INTEREST.**
- 13.1 Assignment by Company. 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. After the receipt by the COMPANY of such offer, the COMPANY shall have thirty (30) days to purchase the Restricted Assets for the price and on the terms and conditions contained in the written proposed offer.
Source: Item 23 — Receipts (FDD pages 53–163)
What This Means (2025 FDD)
According to the 2025 Gold Star Franchise Disclosure Document, a 'Transfer' encompasses a wide array of actions related to the franchise agreement, the business itself, or ownership interests in the franchisee entity. Gold Star requires prior written consent for any transfer. This includes directly or indirectly selling, assigning, conveying, issuing, leasing, pledging, mortgaging, encumbering, or making any disposition of the franchise agreement, the Gold Star business, the store, the retail location, any lease, or any interest in the franchisee that results in a change of control.
A 'Change-in-Control' is defined as when 50% or more of the voting power of the franchisee shifts to a different person or persons than those who held it previously. To determine if a change in control has occurred, Gold Star will aggregate all transfers of ownership interest in a non-individual franchisee since the date the entity first became a franchisee.
Furthermore, if the franchisee is a corporation, limited liability company, or partnership, the issuance of any additional stock, membership, partnership, or other ownership interests, or any transfer of such interests, is considered a 'Transfer'. Each stockholder, member, or partner must agree in writing not to issue, assign, transfer, pledge, sell, or otherwise convey any part of their capital stock, membership interest, or partnership interest without complying with Gold Star's rights as outlined in Section 13 of the franchise agreement. All partnership and operating agreements must contain provisions reflecting these restrictions, and stock certificates must bear a specific legend indicating the transfer restrictions imposed by the franchise agreement.