What is the definition of 'FRANCHISEE' in the context of the Gold Star franchise agreement termination?
Gold_Star Franchise · 2025 FDDAnswer from 2025 FDD Document
of all FRANCHISEE's other obligations hereunder, and undertake to be bound by Sections 11, 12 and 13 of this Agreement. If FRANCHISEE consists of more than one individual, each such individual must execute this Agreement and shall be jointly and severally liable as FRANCHISEE hereunder.
- 17.3 Governance Documents. The partnership agreement, articles of incorporation, articles of organization, operating agreement, bylaws and other organization documents of FRANCHISEE shall recite that the issuance and transfer of any interest therein is restricted by the terms of Section 13 of the Agreement. FRANCHISEE shall also submit to the COMPANY, upon the execution of this Agreement, resolutions from the applicable governing body of FRANCHISEE which authorize the execution, delivery and performance of this Agreement and the transactions contemplated hereby and states, in form and substance, that no shares or other interest in FRANCHISEE shall be issued, transferred or assigned to any person or legal entity except according to the terms of this Agreement.
- 17.4 Securities Legend. FRANCHISEE, if it is a corporation or limited liability company, shall issue no securities upon the face of which the printed legend in the following form and substance does not legibly and conspicuously appear: "The transfer of these [shares/interests/units] is subject to the terms and conditions of one or more Franchise Agreements with Gold Star Chili, Inc. Reference is hereby made to such Franchise Agreement(s) and to the restrictive provisions of the Articles and Regulations of this [corporation/limited liability company]. Copies of such Agreements and restrictions are available at the offices of the [corporation/limited liability company]."
Source: Item 23 — Receipts (FDD pages 53–163)
What This Means (2025 FDD)
According to Gold Star's 2025 Franchise Disclosure Document, the term 'FRANCHISEE' can refer to either a single individual or multiple individuals who are all jointly and severally liable under the franchise agreement. Specifically, if the franchisee consists of more than one person, each individual is required to sign the agreement and is held equally responsible for fulfilling all obligations.
For franchisees that are partnerships, corporations, or limited liability companies, Gold Star requires specific governance documents. These documents, such as partnership agreements, articles of incorporation, or operating agreements, must state that any issuance or transfer of interest is restricted by the terms outlined in Section 13 of the franchise agreement. Additionally, these franchisees must submit resolutions from their governing body that authorize the execution, delivery, and performance of the franchise agreement, ensuring that no shares or interests are transferred without adhering to the agreement's terms.
Furthermore, if the franchisee is a corporation or limited liability company, Gold Star mandates a securities legend on any issued securities. This legend must clearly state that the transfer of shares, interests, or units is subject to the terms and conditions of the franchise agreement with Gold Star. This measure ensures that potential investors are aware of the restrictions and obligations tied to the franchise agreement.
These stipulations protect Gold Star by ensuring that all parties involved in the franchise, whether individuals or entities, are fully aware of their responsibilities and the binding nature of the franchise agreement. It also allows Gold Star to pursue any of the franchisees for the full amount of any damages.