How does the definition of 'Gold Star' as the franchisor (Item 1) relate to the litigation disclosed in Item 3?
Gold_Star Franchise · 2025 FDDAnswer from 2025 FDD Document
igation**
Pending Item:
Gold Star Chili, Inc. and GSC Properties, LLC v. 21 Partners Group LLC and Rasem Daoud. Gold Star and GSC Properties filed a complaint against 21 Partners Group LLC, an existing franchisee, and Rasem Daoud, its owner, on June 14, 2024. On June 9, 2017, the
defendants executed a Lease Agreement with GSC Properties and a Franchise Agreement with Gold Star pursuant to which defendants operated a franchise (the "Hartwell Gold Star") at 21 East Galbraith Road, Cincinnati, Ohio 45216 (the "Property").
On October 9, 2021, there was a fire at the Property that resulted in a total loss of the Hartwell Gold Star. After the fire, the defendants ceased operating, never rebuilt, and retained insurance proceeds which were to be used to rebuild, the Hartwell Gold Star. Defendant 21 Partners was issued a check for $157,990.41 for replacement of furniture, fixtures, and equipment, but never provided Gold Star with these proceeds, despite having a contractual obligation to do so.
What This Means (2025 FDD)
According to the 2025 Gold Star Franchise Disclosure Document, Item 1 defines "Gold Star" as Gold Star Chili, Inc., the franchisor. This definition is directly relevant to the litigation disclosed in Item 3, as Gold Star Chili, Inc. is a party in the lawsuit. Specifically, Gold Star Chili, Inc. and GSC Properties, LLC filed a complaint against 21 Partners Group LLC and Rasem Daoud, an existing franchisee, on June 14, 2024. The suit involves a franchise location that suffered a total loss due to a fire on October 9, 2021.
The litigation centers around the franchisee's failure to rebuild the Hartwell Gold Star location after receiving insurance proceeds. Gold Star alleges that the franchisee, 21 Partners, received $157,990.41 for replacement of furniture, fixtures, and equipment but did not provide these proceeds to Gold Star, despite a contractual obligation to do so. Additionally, while 21 Partners provided building replacement insurance proceeds totaling $455,642.92, the total cost for restoration is claimed to be $1,106,670.00, for which the defendants are allegedly responsible.
This lawsuit is currently in the discovery phase and highlights the importance of franchisees fulfilling their contractual obligations, particularly regarding insurance proceeds and rebuilding after a significant event like a fire. It also demonstrates the franchisor, Gold Star Chili, Inc.'s, willingness to pursue legal action to protect its interests and enforce its agreements with franchisees. For a prospective franchisee, this underscores the need to understand and adhere to all terms of the franchise agreement, including those related to insurance and property restoration.