Does the Gold Star franchise agreement restrict a franchisee from participating in a 'Similar Business' as a consultant?
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 franchise agreement, including any renewals or extensions, a franchisee is prohibited from participating in a 'Similar Business' in any capacity, whether directly or indirectly. This restriction extends to acting as a director, officer, manager, employee, consultant, representative, or agent for such a business.
The term 'Similar Business' is defined broadly as the production, preparation, or sale of food items similar to Gold Star's products, or any other business similar to the Gold Star restaurants, business, or system. It also includes businesses that offer or grant franchises or licenses to others to operate such a business. This means that a franchisee cannot be involved in a competing restaurant or franchise system, even in a consulting role, while they are operating a Gold Star franchise.
Furthermore, even after the franchise agreement expires or is terminated, or if the franchisee transfers their interest in the franchise, there are restrictions in place. For a period of three years following the termination or transfer, the franchisee is prohibited from participating in a Similar Business within a 10-mile radius of the Retail Location or any other existing or approved Gold Star restaurant site. These restrictions are designed to protect Gold Star's market and confidential information.