For a Gold Star franchise, does the definition of 'Transfer' include issuing stock?
Gold_Star Franchise · 2025 FDDAnswer from 2025 FDD Document
If FRANCHISEE or any proposed transferee is a corporation, limited liability company or partnership, such entity shall not issue any additional stock, membership, partnership or other ownership interests or permit any transfer of any such interest, and each stockholder, member or partner thereof shall, in writing, agree not to issue, assign, transfer, pledge, sell or otherwise convey all or part of any capital stock, membership interest or partnership interest in FRANCHISEE or such transferee, without compliance with the rights of the COMPANY set forth under this Section 13.
For the purpose of clarity, any such issuance or transfer will be considered a "Transfer" pursuant to
- this Section 13.
All partnership agreements and operating agreements shall contain provisions setting forth the foregoing restrictions.
All stock certificates shall have endorsed on them the legend set forth in Section 17.4, below.
- 13.8 Death or Disability of Person with Controlling Interest.
Source: Item 23 — Receipts (FDD pages 53–163)
What This Means (2025 FDD)
According to Gold Star's 2025 Franchise Disclosure Document, the definition of "Transfer" does include the issuance of stock. Specifically, if the franchisee is a corporation, limited liability company, or partnership, the entity cannot issue additional stock, membership, partnership, or other ownership interests without complying with Gold Star's rights as outlined in Section 13 of the franchise agreement. Any such issuance or transfer is explicitly considered a "Transfer" under this section.
This restriction is further reinforced by the requirement that all partnership agreements and operating agreements contain provisions setting forth these restrictions. Additionally, all stock certificates must have a legend endorsed on them, referencing the franchise agreement and the restrictions on transfer. This legend ensures that any potential future buyers of the stock are aware of these limitations.
Gold Star also requires that the franchisee's governance documents, such as partnership agreements, articles of incorporation, and operating agreements, explicitly state that the issuance and transfer of any interest are restricted by Section 13 of the agreement. Furthermore, the franchisee must submit resolutions from its governing body authorizing the execution, delivery, and performance of the franchise agreement, and stating that no shares or other interest in the franchisee will be issued, transferred, or assigned except according to the terms of the agreement.
These measures ensure that Gold Star maintains control over who has an ownership stake in its franchisees, safeguarding the brand's integrity and consistency. A prospective franchisee should carefully review Section 13 of the franchise agreement to fully understand the implications of these transfer restrictions and ensure compliance with Gold Star's requirements.