Does the Gold Star franchise agreement entitle the franchisee to any share of discounts the company receives from suppliers?
Gold_Star Franchise · 2025 FDDAnswer from 2025 FDD Document
- 19.2 No Right to Discounts or Profits. Nothing contained in this Agreement shall be construed so as to limit or affect in any way whatsoever any profits, revenues or income the COMPANY or any of its affiliates or associates may earn or charge on sales or services to FRANCHISEE, nor shall it be construed so as to entitle FRANCHISEE to any share or participation in any discount, rebates, commission, fees or other sums that the COMPANY may receive from suppliers, distributors, manufacturers, sales organizations or others supplying goods or services to the COMPANY or FRANCHISEE, or judgments or damages awarded to the COMPANY of any kind whatsoever, and FRANCHISEE expressly acknowledges that the COMPANY may earn or receive such without any obligation therefor to FRANCHISEE.
Source: Item 23 — Receipts (FDD pages 53–163)
What This Means (2025 FDD)
According to the 2025 Gold Star Franchise Disclosure Document, franchisees are not entitled to any share of discounts, rebates, commissions, fees, or other sums that Gold Star may receive from suppliers, distributors, manufacturers, sales organizations, or others providing goods or services to Gold Star or the franchisee. This also includes any judgments or damages awarded to Gold Star.
This means that even if Gold Star negotiates favorable deals with its suppliers, the benefits of those deals accrue solely to Gold Star, and are not shared with the franchisees. This is a fairly common practice in franchising, as the franchisor often leverages its collective buying power to secure better rates, which can then contribute to the overall profitability of the franchise system.
For a prospective Gold Star franchisee, this implies that the cost of goods and services purchased for the restaurant will not necessarily reflect the lowest possible price available in the market. While Gold Star may benefit from discounts, these savings are not passed down to the individual franchise owner. Franchisees should factor this into their financial projections and understand that their cost of goods may be higher than if they were able to source supplies independently.
It is important for potential franchisees to fully understand this aspect of the franchise agreement and to discuss with existing franchisees how this arrangement impacts their profitability. Understanding the supply chain and pricing structure is crucial for making an informed investment decision.