Does the Gold Star franchise agreement specify that the liquidated damages for breach of confidentiality are considered a penalty?
Gold_Star Franchise · 2025 FDDAnswer from 2025 FDD Document
o take any action but may take any action it deems appropriate. FRANCHISEE also agrees not to contest or aid in contesting, directly or indirectly, the COMPANY's right, title, ownership or interest in or to, or the validity or enforceability of, any copyrights, Confidential Material or the System, or contest the COMPANY's sole right to register, use or franchise or license others to use any such copyrights, the System or the Confidential Material, during or after the term of this Agreement or any extension or renewal thereof.
- 12.2 Damages for Violations. If FRANCHISEE discloses any Confidential Material to any person, firm or entity or otherwise breaches its obligations under this Section 12, or if one of the Related Parties or any other person subject to FRANCHISEE's control makes such a disclosure or otherwise breaches its obligations under this Section 12 as a result of the failure of FRANCHISEE
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 explicitly states that liquidated damages for breach of confidentiality are not considered a penalty. Specifically, if a franchisee discloses confidential material, they will be required to pay Gold Star $100,000 for each breach.
The agreement clarifies that this $100,000 payment is considered liquidated damages, representing a reasonable pre-estimate of the actual damages Gold Star would incur, rather than a penalty. This pre-estimation is included because the precise amount of actual damages would be extremely difficult to determine.
This clause does not prevent Gold Star from pursuing injunctive or other legal relief in addition to the liquidated damages. This means that Gold Star could seek a court order to stop the franchisee from further disclosing confidential information, alongside the monetary compensation.