For a Gold Star franchise, does the restriction on transfer of interest apply to transfers by merger or consolidation?
Gold_Star Franchise · 2025 FDDAnswer from 2025 FDD Document
The COMPANY has granted this franchise in reliance on the individual or collective character, skill, aptitude and business and financial capacity of FRANCHISEE and its Principals.
Accordingly, neither FRANCHISEE nor any person with an interest in FRANCHISEE shall (directly or indirectly, contingently, voluntarily, involuntarily, by contract, by will, by merger or consolidation, by transfer or issuance of stock, membership or partnership interests, by operation of law or otherwise), without the prior written consent of the COMPANY, sell, assign, transfer, convey, issue, lease, pledge, mortgage, encumber or make any disposition of in any manner (collectively, "Transfer"), or permit the Transfer of, or publicly advertise or offer any Transfer of, all or any part of any of the following or any interest therein (collectively the "Restricted Assets"): this Agreement, the Business, the Store, the Retail Location (whether owned or leased), any Lease, any interest or share in FRANCHISEE which results in a Change-in-Control (defined below), or all or a material part of the assets, real or personal, tangible or intangible, pertaining to the Store or the 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 restricts franchisees from transferring their interests without prior written consent from Gold Star. This restriction applies to various forms of transfer, including those occurring through merger or consolidation. Specifically, the document states that neither the franchisee nor any person with interest in the franchisee can directly or indirectly transfer any part of the Restricted Assets without Gold Star's consent.
This restriction covers a broad range of transfer methods, explicitly mentioning 'by merger or consolidation.' The Restricted Assets include the Franchise Agreement, the Business, the Store, the Retail Location, any Lease, any interest or share in FRANCHISEE which results in a Change-in-Control, or all or a material part of the assets, real or personal, tangible or intangible, pertaining to the Store or the Business. A Change-in-Control is defined as when 50% or more of the voting power of FRANCHISEE is vested in a different person or persons.
For a prospective Gold Star franchisee, this means that any significant change in ownership or control, whether through a direct sale, merger, consolidation, or other means, requires the franchisor's approval. This provision allows Gold Star to maintain control over who operates its franchises and ensures that any new controlling party meets their standards. Failure to obtain consent for such a transfer would be a breach of the franchise agreement.
This level of control is common in franchising to protect the brand and ensure consistent operations across all locations. Franchisees should carefully consider these restrictions and understand the process for seeking approval for any potential transfer of ownership or control in the future.