Does the Gold Star franchise agreement prevent a franchisee from participating in a similar business as an officer?
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 is prohibited from owning, operating, maintaining, engaging in, or participating in any capacity (including as a director, officer, manager, employee, consultant, representative, or agent) in a "Similar Business." A "Similar Business" is defined as one involving 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 extends beyond direct ownership or operation, explicitly including participation as an officer. This means a franchisee cannot hold an officer position in a competing business during the term of their Gold Star franchise agreement. The agreement also specifies that after the termination or expiration of the franchise agreement, the franchisee is restricted for a period of three years from engaging in a similar business within a 10-mile radius of the Retail Location or any other Restaurant site then existing or approved for development.
The Gold Star franchise agreement emphasizes that these restrictions are considered fair and reasonable, and the franchisee acknowledges that they are not the result of overreaching or duress by Gold Star. Franchisees also confirm that adhering to these covenants will not cause undue hardship and will not impair their ability to find suitable employment after the franchise term, if applicable. These covenants are designed to protect Gold Star's confidential information, trade secrets, and the goodwill associated with its brand and system.