Is the Gold Star franchise grant exclusive, and if not, what protections are provided?
Gold_Star Franchise · 2025 FDDAnswer from 2025 FDD Document
etail Location (the term is set forth on the cover page of this Agreement) or until otherwise terminated as hereinafter provided; provided FRANCHISEE has secured, and continues to secure, by ownership or lease, the Retail Location for the same term.
- 1.3 Protected Territory. Except for the protections provided in this Section 1.3, the franchise and other rights granted herein are non-exclusive. The COMPANY agrees not to operate or license another to operate a Restaurant within the territory defined on the cover page hereof (the "Protected Territory") so long as FRANCHISEE: (i) fully complies with all methods, procedures, standards and specifications required by the COMPANY in the Manual (defined in Section 3.3 below) or otherwise in writing; and (ii) does not violate any of the other provisions of this Agreement or has cured such violation in the time period provided for herein. Notwithstanding the foregoing, the COMPANY may (x) establish or license another to establish one or more Special Purpose Outlets (as defined below) within the Protected Territory and (y) sell or otherwise distribute within the Protected Territory products similar to or the same as those offered by the Restaurant through alternative channels of distribution (including without limitation grocery and convenience stores and internet, direct mail and catalog sales); provided, however, that in the event that the Retail Location is a Special Purpose Outlet, the COMPANY will not operate or license another to operate an additional Restaurant in the same building as the Special Purpose Outlet. A "Special Purpose Outlet" is defined as a Gold Star Chili restaurant located inside shopping malls or centers, zoos, airports, race tracks, amusement parks, fairgrounds, sports stadiums, hospitals, factories, bars, schools, gas stations, and special events. Nothing herein shall limit the COMPANY's rights or activities outside of the Protected Territory in any respect whatsoever (without limiting the generality of the foregoing, it is expressly agreed that no exclusive, protected or other territorial rights of any kind whatsoever outside of the Protected Territory, including any contiguous market area, is granted or to be inferred to or for FRANCHISEE). Nothing herein shall limit the COMPANY, its affiliates or any other franchisee or licensee in soliciting or accepting orders from customers anywhere whether within or outside of the Protected Territory.
- 1.4 Additional Stores.
Source: Item 23 — Receipts (FDD pages 53–163)
What This Means (2025 FDD)
According to Gold Star's 2025 Franchise Disclosure Document, the franchise rights granted are generally non-exclusive, but there are some territorial protections. Gold Star agrees not to operate or license another to operate a restaurant within the franchisee's Protected Territory, which is defined on the cover page of the franchise agreement. This protection is contingent on the franchisee fully complying with Gold Star's operational standards and not violating any terms of the franchise agreement.
However, Gold Star retains the right to establish or license Special Purpose Outlets within the Protected Territory. These Special Purpose Outlets can be located in places like shopping malls, zoos, airports, amusement parks, hospitals, and gas stations. Gold Star can also sell products similar to those offered in the restaurant through alternative channels of distribution, such as grocery stores, convenience stores, and online sales, within the Protected Territory. However, if a Retail Location is a Special Purpose Outlet, Gold Star will not operate or license another to operate an additional Restaurant in the same building as the Special Purpose Outlet.
The territorial protections apply only within the defined Protected Territory. Gold Star's rights and activities outside of this territory are not limited in any way. Furthermore, neither Gold Star nor its affiliates are restricted from soliciting or accepting orders from customers located anywhere, whether inside or outside the Protected Territory. The rights granted to the franchisee pertain solely to the Retail Location itself.
For prospective franchisees, it's crucial to understand the specific boundaries of the Protected Territory and the potential for competition from Special Purpose Outlets or alternative distribution channels. Franchisees should also be aware that the agreement does not prevent Gold Star from soliciting customers inside their protected territory. Reviewing the definition of "Protected Territory" on the cover page of the Franchise Agreement is essential to understanding the scope of these protections.