Does the Gold Star franchise agreement restrict a franchisee from having any interest whatsoever in any Similar Business?
Gold_Star Franchise · 2025 FDDAnswer from 2025 FDD Document
- 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.
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.
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 places restrictions on a franchisee's involvement with similar businesses. During the term of the agreement, a franchisee is prohibited from owning, operating, maintaining, engaging in, participating in, or having any interest whatsoever in any "Similar Business," whether directly or indirectly. A "Similar Business" is defined as one that produces, prepares, or sells food items similar to Gold Star's products, or any business similar to the Gold Star restaurants or system, including those that offer or grant franchises or licenses to operate such businesses.
This restriction extends beyond direct ownership or operation. It includes any form of participation, such as being a director, officer, manager, employee, consultant, representative, or agent in a similar business. Furthermore, franchisees are not allowed to permit any premises they own or control within their protected territory to be used for a similar business during the term of the agreement and any extensions or renewals.
Following the termination or expiration of the franchise agreement, the restrictions ease slightly but do not disappear entirely. For a period of three years after the agreement ends, a franchisee is still prohibited from having any interest in a similar business within a 10-mile radius of the Gold Star location or any other restaurant site existing or approved for development. These restrictions are put in place to protect Gold Star's market share, trade secrets, and overall brand integrity.
Prospective franchisees should carefully consider these restrictions and how they might impact their future business endeavors. It is important to fully understand the definition of "Similar Business" as defined in the franchise agreement and to assess whether these restrictions align with their long-term business goals. Franchisees should also be aware of the geographical limitations that apply even after the franchise agreement has ended.