Does the Gold Star franchise agreement prevent a franchisee from participating in a similar business as a manager?
Gold_Star Franchise · 2025 FDDAnswer from 2025 FDD Document
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.
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.
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 that could prevent a franchisee from participating in a similar business as a manager, both during the term of the agreement and for a period afterward. Specifically, during the term of the agreement, franchisees are prohibited from diverting Gold Star's business or customers to a similar business or from performing any action that could harm Gold Star's goodwill.
Post-termination, the agreement extends these restrictions. For a period of three years after the agreement expires or terminates, the franchisee cannot own, operate, maintain, engage in, or participate in any capacity (including as a director, officer, manager, employee, consultant, representative, or agent) in a similar business. This restriction applies within a 10-mile radius of the Gold Star Retail Location or any other existing or approved Gold Star restaurant site.
These non-compete clauses are common in franchise agreements to protect the brand and its market share. Gold Star franchisees acknowledge that these restrictions are fair and reasonable and that they will not cause undue hardship or impair their ability to find suitable employment. Prospective franchisees should carefully consider these limitations and how they might affect their future business activities before entering into an agreement with Gold Star.