Does the Gold Star franchise agreement prevent a franchisee from participating in a similar business as an employee?
Gold_Star Franchise · 2025 FDDAnswer from 2025 FDD Document
d future partners, shareholders, or members acknowledge that the Products and the System are unique and distinctive and have been developed by the COMPANY at great effort, time and expense, and that FRANCHISEE will have regular and continuing access to valuable and confidential information, training and trade secrets regarding the Proprietary Products, the System and the Business and that FRANCHISEE would not have had such access except as a result of entering into this Agreement. In consideration of the foregoing, FRANCHISEE agrees that:
- 11.1.1 During the term of this Agreement or any renewal or extension thereof, 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) or have any interest whatsoever in any "Similar Business". As used herein, "Similar Business" means the production, 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.
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 restrictive covenants that limit a franchisee's involvement with similar businesses. During the term of the agreement, a franchisee cannot participate in a "Similar Business" in any capacity, including as an employee. A "Similar Business" is defined as one that involves the production, preparation, or sale of food items similar to Gold Star's products, or any business similar to the Gold Star restaurants. This restriction applies to the franchisee directly or indirectly, whether for themselves or in conjunction with any other entity.
Following the termination or expiration of the franchise agreement, the franchisee is further restricted from participating in a similar business within a 10-mile radius of the Gold Star location or any other existing or approved restaurant site for a period of three years. This post-term restriction extends to owning, operating, maintaining, engaging in, or participating in any capacity (including as an employee) in a similar business.
Gold Star emphasizes that these restrictions are considered fair and reasonable, and the franchisee acknowledges that they have not been subjected to any duress or coercion in agreeing to these terms. The franchisee also confirms that adhering to these covenants will not cause undue hardship and will not impair their ability to find suitable employment after the franchise agreement concludes. This suggests that while restrictions exist, Gold Star believes they are balanced to protect their business interests without unduly limiting the franchisee's future opportunities.