After the Gold Star franchise is terminated or expires, for how long does the non-competition covenant apply?
Gold_Star Franchise · 2025 FDDAnswer from 2025 FDD Document
| Provision | Section in | Summary |
|---|---|---|
| r. Non-competition covenants after the Franchise is terminated or expires | Section 11 | No competing business for 3 years and within 10 miles of your Retail Location or any other Gold Star (existing or approved) franchise (including after assignment); no part of any owned or controlled premises in your Protected Territory to be used to any extent for any competing business for 3 years |
Source: Item 17 — Renewal, Termination, Transfer, and Dispute Resolution (FDD pages 42–45)
What This Means (2025 FDD)
According to Gold Star's 2025 Franchise Disclosure Document, if the franchise is terminated or expires, the non-competition covenant applies for a period of 3 years. During this time, the franchisee is prohibited from engaging in any competing business within a 10-mile radius of their former Retail Location or any other existing or approved Gold Star franchise. This restriction also extends to preventing the use of any owned or controlled premises within the Protected Territory for any competing business during the same 3-year period.
This post-term non-compete agreement is a standard practice in franchising to protect the brand and market share of Gold Star. It prevents former franchisees from leveraging the knowledge and experience gained while operating a Gold Star franchise to directly compete with the system. The 10-mile radius restriction is designed to prevent direct competition within the immediate market area of existing Gold Star locations.
Prospective franchisees should carefully consider the implications of this non-compete clause. It could significantly limit their business options if they decide to leave the Gold Star system. It is important to fully understand the geographic scope and duration of the restriction, as well as the definition of what constitutes a "competing business." Franchisees should also be aware that these covenants are subject to state laws, which may restrict the franchisor's rights under the non-compete agreement. Consulting with a legal advisor is recommended to fully understand these restrictions and their potential impact.
It is also important to note that all holders of an interest in the franchise must personally guarantee the franchisee's obligations under the Franchise Agreement, including the non-compete provisions. This means that partners or shareholders are also bound by these restrictions. Therefore, it is crucial for all parties involved to fully understand the terms of the non-compete agreement before investing in a Gold Star franchise.