Does the Gold Star Franchise Agreement prevent a franchisee from being a consultant for a similar business during the term of the agreement?
Gold_Star Franchise · 2025 FDDAnswer from 2025 FDD Document
city 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. FRANCHISEE further acknowledges and confirms that FRANCHISEE's observance of the covenants contained in this Agreement will not cause FRANCHSIEE any undue hardship, financial or otherwise, and that enforcement of each of the covenants contained in this Agreement will not impair FRANCHISEE's ability to obtain employment commensurate with FRANCHIEE's abilities and on terms fully acceptable to FRANCHSIEE.
This Section 11.1 (and the requirements with respect to Related Parties under Section 11.2) shall not apply to the ownership by FRANCHISEE (or an applicable Related Party) of five percent (5%) or less of the issued and outstanding shares in any publicly-held corporation, unless the same shall constitute a controlling interest therein, or to the operation of another Store in compliance with another Franchise Agreement with the COMPANY.
Source: Item 23 — Receipts (FDD pages 53–163)
What This Means (2025 FDD)
According to Gold Star's 2025 Franchise Disclosure Document, the Franchise Agreement includes restrictions on a franchisee's involvement with similar businesses both during and after the term of the agreement. Specifically, during the term and any extensions, a Gold Star franchisee is prohibited from engaging in activities that could harm the company's business or goodwill.
During the term of the Franchise Agreement, a franchisee cannot divert Gold Star's customers to a similar business, solicit Gold Star employees to leave their employment, or perform any action that could be detrimental to the goodwill associated with Gold Star's brand and system.
Following the termination or expiration of the Franchise Agreement, or if the franchisee transfers their interest in the business, the franchisee is restricted from owning, operating, or participating in any capacity (including as a consultant) in a similar business within a 10-mile radius of the Gold Star location or any other existing or approved restaurant site. This restriction lasts for three years. These restrictions are acknowledged by the franchisee as fair and reasonable and not the result of overreaching by Gold Star.