After the Gold Star franchise agreement expires, what geographic restriction applies to a franchisee 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.
Source: Item 23 — Receipts (FDD pages 53–163)
What This Means (2025 FDD)
According to Gold Star's 2025 Franchise Disclosure Document, a franchisee is restricted from operating a similar business within a specific geographic area for a defined period after the franchise agreement expires or terminates. Specifically, for three years after the agreement ends, the franchisee cannot own, operate, maintain, engage in, or participate in any capacity in a similar business. This restriction applies to locations within a 10-mile radius of the original Gold Star retail location or any other existing or approved Gold Star restaurant site.
This non-compete clause prevents former franchisees from directly competing with Gold Star shortly after their franchise agreement concludes. The clause covers a broad range of activities, including being a director, officer, manager, employee, consultant, representative, or agent of a similar business. This aims to protect Gold Star's market share and brand recognition by preventing former franchisees from using their knowledge and experience gained while operating a Gold Star franchise to benefit a competing business in close proximity.
The FDD also states that the franchisee acknowledges the fairness and reasonableness of these restrictions, confirming they were not imposed under duress and that complying with them will not cause undue hardship or impair their ability to find suitable employment. This acknowledgment suggests that Gold Star believes the restrictions are necessary to protect its business interests while still allowing the franchisee to pursue other opportunities.
Such post-term non-compete agreements are common in franchising to protect the brand and prevent unfair competition. Prospective Gold Star franchisees should carefully consider the implications of this restriction, especially if they plan to remain in the same geographic area after their franchise agreement expires.