Is a Gold Star franchisee allowed to divert Gold Star customers to a similar business during the term of the agreement?
Gold_Star Franchise · 2025 FDDAnswer from 2025 FDD Document
city whatsoever, either directly or indirectly, for itself, himself or herself, or through, on behalf of or in conjunction with any other person, partnership, limited liability company, corporation or organization, own, operate, maintain, engage in, participate in (as director, officer, manager, employee, consultant, representative, agent or otherwise) have any interest whatsoever in any Similar Business at a location within a radius of ten (10) miles of the Retail Location or any other Restaurant site then existing or approved for development.
- 11.1.4 During the term of this Agreement and all extensions or renewals thereof and for three (3) years thereafter, FRANCHISEE shall not, directly or indirectly: (a) divert or attempt to divert any of the COMPANY's business or any of the COMPANY's customers to any Similar Business; (b) induce COMPANY employees to leave their employment with the COMPANY; or (c) do or perform any other act injurious or prejudicial to the COMPANY's goodwill associated with its Marks and System.
FRANCHISEE acknowledges and confirms that the time, content and geographical restrictions contained in this Section are fair and reasonable.
Source: Item 23 — Receipts (FDD pages 53–163)
What This Means (2025 FDD)
According to the 2025 Gold Star Franchise Disclosure Document, a franchisee is prohibited from diverting or attempting to divert Gold Star's business or customers to a similar business during the term of the franchise agreement. This restriction also extends for three years after the agreement's term, including any extensions or renewals. This means that while operating a Gold Star franchise, and for three years afterward, a franchisee cannot actively try to take Gold Star customers to a competing business.
This provision protects Gold Star's customer base and business interests by preventing franchisees from using their access to Gold Star customers to benefit a competing venture. The term 'Similar Business' is not defined in this excerpt, so a prospective franchisee should seek clarification from Gold Star regarding what constitutes a 'Similar Business' to fully understand the scope of this restriction.
This type of clause is standard in franchise agreements to protect the franchisor's brand and customer relationships. Franchisees acknowledge that these restrictions are fair and reasonable and that they have the opportunity to seek independent legal and financial advice before agreeing to them. This acknowledgement underscores the importance of understanding the implications of such restrictions before entering into a franchise agreement with Gold Star.