Does the Gold Star franchise agreement restrict a franchisee from diverting customers to a 'Similar Business'?
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.
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 does include restrictions on diverting customers to a similar business. During the term of the agreement, including any extensions or renewals, and for three years after, a franchisee cannot directly or indirectly divert or attempt to divert Gold Star's business or customers to any similar business.
This restriction also prevents franchisees from inducing Gold Star employees to leave their employment with the company. Additionally, franchisees are prohibited from performing any action that could be harmful or damaging to the goodwill associated with Gold Star's trademarks and overall system.
These measures are in place to protect Gold Star's market position and brand reputation. The franchise agreement states that the franchisee acknowledges that these restrictions are fair and reasonable and are not a result of overreaching, duress, or coercion by Gold Star. The franchisee also acknowledges that adhering to these covenants will not cause undue hardship and will not impair their ability to find suitable employment.