For what duration after the Gold Star franchise agreement expires or terminates is the franchisee restricted from operating a similar business?
Gold_Star Franchise · 2025 FDDAnswer from 2025 FDD Document
preparation or sale of any food items similar to the Products or any other business similar to the Restaurants, the Business or the System or that offers or grants franchises or licenses to others to operate such a business.
- 11.1.2 During the term of this Agreement and all extensions of renewal thereof and for three (3) years thereafter, FRANCHISEE shall not let or permit any part of any premises owned or controlled by FRANCHISEE in the Protected Territory to be used for a business, all or any part of which consists of a Similar Business.
- 11.1.3 Upon expiration or termination of this Agreement for any reason, or if FRANCHISEE assigns or transfers its interest in any Restricted Assets in any manner, then for a period of three (3) years thereafter, FRANCHISEE shall not, in any capacity whatsoever, either directly or indirectly, for itself, himself or herself, or through, on behalf of or in conjunction with any other person, partnership, limited liability company, corporation or organization, own, operate, maintain, engage in, participate in (as director, officer, manager, employee, consultant, representative, agent or otherwise) have any interest whatsoever in any Similar Business at a location within a radius of ten (10) miles of the Retail Location or any other Restaurant site then existing or approved for development.
- 11.1.4 During the term of this Agreement and all extensions or renewals thereof and for three (3) years thereafter, FRANCHISEE shall not, directly or indirectly: (a) divert or attempt to divert any of the COMPANY's business or any of the COMPANY's customers to any Similar Business; (b) induce COMPANY employees to leave their employment with the COMPANY; or (c) do or perform any other act injurious or prejudicial to the COMPANY's goodwill associated with its Marks and System.
FRANCHISEE acknowledges and confirms that the time, content and geographical restrictions contained in this Section are fair and reasonable. They are not the result of overreaching, duress, or coercion of any kind by the COMPANY.
Source: Item 23 — Receipts (FDD pages 53–163)
What This Means (2025 FDD)
According to Gold Star's 2025 Franchise Disclosure Document, franchisees face certain restrictions after the franchise agreement expires or terminates. Specifically, for a period of three years following the expiration or termination of the agreement, the franchisee is prohibited from engaging in any capacity with a similar business within a 10-mile radius of the original Retail Location or any other existing or approved Gold Star restaurant site. This restriction applies whether the franchisee acts directly or indirectly, individually or in conjunction with others.
This post-term non-compete clause prevents former franchisees from leveraging their knowledge of the Gold Star system to compete against the brand in close proximity to existing locations. The FDD emphasizes that franchisees acknowledge these restrictions as fair and reasonable, not resulting from any coercion by Gold Star. Franchisees also confirm that adhering to these covenants will not cause undue hardship or impair their ability to find suitable employment.
In addition to the geographical and business-type restrictions, the agreement also states that during the term of the agreement and for three years after, the franchisee cannot divert Gold Star's customers to a similar business, induce Gold Star employees to leave their employment, or perform any action that could harm the goodwill associated with Gold Star's trademarks and system. These measures are designed to protect Gold Star's market position and brand reputation even after a franchise relationship ends.
These types of restrictions are common in franchising to protect the brand and prevent unfair competition from former franchisees. Prospective Gold Star franchisees should carefully consider the implications of these post-term covenants, especially if they plan to remain in the same geographic area and industry after their franchise agreement concludes.