In the Gold Star franchise agreement, what happens if the franchisee defaults?
Gold_Star Franchise · 2025 FDDAnswer from 2025 FDD Document
he purchase of assets under Section 15.2 above.
- 15.4 No Right to Use Marks. As agreed to in Section 6 of this Agreement, all rights to any Marks, patents and copyrights licensed hereunder belong to the COMPANY exclusively, and upon expiration or termination of this Agreement, the COMPANY may, if FRANCHISEE does not do so, execute in FRANCHISEE's name, at FRANCHISEE's expense and on FRANCHISEE's behalf any and all documents necessary to end and cause the discontinuance immediately of FRANCHISEE's use of or right to use the Marks, patents and copyrights and the COMPANY is hereby irrevocably appointed and designated as FRANCHISEE's attorney-in-fact to do so.
- 15.5 Right of Entry; Appointment of Receiver. If FRANCHISEE is in default under the terms of this Agreement, in addition to the COMPANY's right to terminate this Agreement, and without limiting any other rights or remedies to which the COMPANY may be entitled at law or in equity, the COMPANY will have the right to take any of the following actions:
- 15.5.1 enter upon the premises of the Franchised Restaurant and exercise complete authority with respect to the operation of the Store until such time as the COMPANY determines, in its sole discretion, that FRANCHISEE has cured the default and that there is compliance with the terms of this Agreement; and FRANCHISEE agrees that a designated representative of the COMPANY may operate and control the Store, and that FRANCHISEE will pay the COMPANY for its labor costs, travel expenses, lodging and other expenses reasonably incurred by the - COMPANY in sending a representative to enforce compliance with the terms of this Agreement; or
- 15.5.2 petition any court of competent jurisdiction to appoint a receiver for the business or assets of FRANCHISEE, and FRANCHISEE agrees that it will not contest any proceeding or petition for the appointment of a receiver.
- 15.6 Liquidated Damages. If FRANCHISEE abandons or discontinues the franchise for any reason prior to the expiration of the term of this Agreement, FRANCHISEE will pay to the COMPANY as liquidated damages and not as a penalty, and in addition to but not in limitation of any other rights and remedies to which the COMPANY is entitled, an amount equal to the average monthly continuing franchise fee payments due from FRANCHISEE during the twelve months preceding the abandonment or discontinuance of the franchise, multiplied by the lesser of twenty-four or the number of months remaining in the term of this Agreement.
16. RENEWAL.
16.1 Renewal Option.
Source: Item 23 — Receipts (FDD pages 53–163)
What This Means (2025 FDD)
According to the 2025 Gold Star Franchise Disclosure Document, if a franchisee defaults, Gold Star has specific rights and remedies. Gold Star can enter the premises of the franchised restaurant and take complete authority over its operation until the default is cured. The franchisee is responsible for covering Gold Star's labor costs, travel expenses, lodging, and other expenses incurred while enforcing compliance with the franchise agreement. Alternatively, Gold Star can petition a court to appoint a receiver for the franchisee's business or assets, and the franchisee agrees not to contest this action.
Additionally, if the Gold Star franchisee abandons or discontinues the franchise before the agreement's expiration, they must pay liquidated damages to Gold Star. This amount is calculated based on the average monthly continuing franchise fee payments from the previous twelve months, multiplied by either twenty-four or the number of months remaining in the agreement, whichever is less. This payment is in addition to any other rights and remedies Gold Star may pursue.
Furthermore, the franchise agreement outlines that if Gold Star incurs any costs or expenses, including attorneys' fees and court costs, while enforcing its rights under the agreement, it is entitled to recover all such costs and expenses from the franchisee on demand, along with interest accruing from the date the payment was due. These measures protect Gold Star's interests and ensure franchisees adhere to the terms of the franchise agreement.