What is the definition of 'Protected Territory' for a Gold Star franchise?
Gold_Star Franchise · 2025 FDDAnswer from 2025 FDD Document
- 1.3 Protected Territory.
Except for the protections provided in this Section 1.3, the franchise and other rights granted herein are non-exclusive.
The COMPANY agrees not to operate or license another to operate a Restaurant within the territory defined on the cover page hereof (the "Protected Territory") so long as FRANCHISEE: (i) fully complies with all methods, procedures, standards and specifications required by the COMPANY in the Manual (defined in Section 3.3 below) or otherwise in writing; and (ii) does not violate any of the other provisions of this Agreement or has cured such violation in the time period provided for herein.
Notwithstanding the foregoing, the COMPANY may (x) establish or license another to establish one or more Special Purpose Outlets (as defined below) within the Protected Territory and (y) sell or otherwise distribute within the Protected Territory products similar to or the same as those offered by the Restaurant through alternative channels of distribution (including without limitation grocery and convenience stores and internet, direct mail and catalog sales); provided, however, that in the event that the Retail Location is a Special Purpose Outlet, the COMPANY will not operate or license another to operate an additional Restaurant in the same building as the Special Purpose Outlet.
A "Special Purpose Outlet" is defined as a Gold Star Chili restaurant located inside shopping malls or centers, zoos, airports, race tracks, amusement parks, fairgrounds, sports stadiums, hospitals, factories, bars, schools, gas stations, and special events.
Nothing herein shall limit the COMPANY's rights or activities outside of the Protected Territory in any respect whatsoever (without limiting the generality of the foregoing, it is expressly agreed that no exclusive, protected or other territorial rights of any kind whatsoever outside of the Protected Territory, including any contiguous market area, is granted or to be inferred to or for FRANCHISEE).
Nothing herein shall limit the COMPANY, its affiliates or any other franchisee or licensee in soliciting or accepting orders from customers anywhere whether within or outside of the Protected Territory.
- 1.4 Additional Stores.
The rights granted FRANCHISEE under this Agreement relate solely to the Retail Location.
Source: Item 23 — Receipts (FDD pages 53–163)
What This Means (2025 FDD)
According to Gold Star's 2025 Franchise Disclosure Document, a franchisee's rights are non-exclusive except for the protections described in Section 1.3. Gold Star agrees not to operate or license another restaurant within the Protected Territory, which is defined on the cover page of the franchise agreement. This protection is contingent upon the franchisee fully complying with all operational standards and not violating any provisions of the agreement.
However, Gold Star retains the right to establish or license Special Purpose Outlets within the Protected Territory. These Special Purpose Outlets include locations inside shopping malls, zoos, airports, and other similar venues. Additionally, Gold Star can sell products similar to those offered in the restaurant through alternative channels such as grocery stores, convenience stores, and online sales. The only restriction is that Gold Star will not operate or license another restaurant in the same building as a Special Purpose Outlet.
The agreement explicitly states that Gold Star's rights and activities outside the Protected Territory are not limited in any way. The franchisee receives no exclusive, protected, or other territorial rights outside of their defined Protected Territory. Furthermore, neither Gold Star, its affiliates, nor any other franchisee or licensee is restricted from soliciting or accepting orders from customers, whether they are located within or outside the franchisee's Protected Territory. The rights granted to the franchisee pertain solely to the Retail Location.
In practical terms, while a Gold Star franchisee is granted a Protected Territory, this protection has limitations. The franchisor can still operate alternative outlets and sales channels within that territory, which could impact the franchisee's potential customer base and revenue. A prospective franchisee should carefully review the definition of their Protected Territory on the cover page of the Franchise Agreement and consider the potential impact of Special Purpose Outlets and alternative distribution channels on their business.