Does the Gold Star franchise agreement limit the profits the company can earn on sales to the franchisee?
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, the franchise agreement does not limit the profits, revenues, or income that Gold Star or its affiliates may earn from sales or services to the franchisee. The agreement explicitly states that franchisees are not entitled to any share of discounts, rebates, commissions, fees, or other sums that Gold Star may receive from suppliers or other entities. Gold Star is not obligated to share any of these earnings with the franchisee.
This provision clarifies that Gold Star retains the right to profit fully from its sales and services to franchisees without restriction. It also confirms that franchisees have no claim to any financial benefits Gold Star receives from third parties. This is a standard practice in franchising, where the franchisor's revenue streams often include sales of goods and services to franchisees, in addition to franchise fees and royalties.
For a prospective Gold Star franchisee, this means that the cost of goods and services purchased from Gold Star may not necessarily reflect the company's actual cost. Gold Star is entitled to mark up these items and retain the profit. Franchisees should factor this into their financial projections and consider whether the potential profitability of the franchise justifies the cost of these required purchases. Understanding this aspect of the agreement is crucial for making an informed investment decision.