Can a Gold Star franchisee assign or transfer the franchise agreement without Gold Star's consent?
Gold_Star Franchise · 2025 FDDAnswer from 2025 FDD Document
INTEREST.**
- 13.1 Assignment by Company. This Agreement shall inure to the benefit of the COMPANY and its successors and assigns. The COMPANY may sell, transfer or assign this Agreement and any rights or duties hereunder to any third party at any time, and upon the giving of written notice to FRANCHISEE of any such transfer, COMPANY will have no further responsibility for the performance of any of the transferred obligations. FRANCHISEE shall execute any forms that the COMPANY may reasonably require in connection with any transfer or assignment by the COMPANY.
- 13.2 No Assignment by Franchisee. 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. A "Change-in-Control" transaction or series of transactions shall occur when 50% or more of the voting power of FRANCHISEE is vested in a person or persons (as applicable) different from the person or persons (as applicable) with whom 50% of voting power was vested immediately prior to the transaction or series of transactions. For purposes of this subparagraph, all transfers of an ownership interest in a nonindividual franchisee occurring since the date the entity first became a franchisee will be aggregated to determine whether a Change-in-Control has occurred.
- 13.3 Company's Right of First Refusal. Notwithstanding anything contained in this Agreement to the contrary, if FRANCHISEE or any Principal wishes to Transfer or accept an offer to Transfer, in any manner whatsoever, all or any part of any of the Restricted Assets, or any interest therein, FRANCHISEE or its Principals, as the case may be, will first obtain a bona fide, executed, written offer from a fullydisclosed purchaser and will submit an exact copy thereof to the COMPANY. After the receipt by the COMPANY of such offer, the COMPANY shall have thirty (30) days to purchase the Restricted Assets for the price and on the terms and conditions contained in the written proposed offer. Failure of the COMPANY to accept such offer within said thirty (30) days shall constitute a rejection (provided that the COMPANY may substitute cash for any form of payment proposed in such offer and shall have not less than sixty (60) days to prepare for
closing).
Source: Item 23 — Receipts (FDD pages 53–163)
What This Means (2025 FDD)
According to Gold Star's 2025 Franchise Disclosure Document, franchisees generally cannot transfer their franchise agreement without prior written consent from Gold Star. Gold Star grants the franchise based on the franchisee's individual or collective character, skills, aptitude, and business and financial capacity. This means that any direct or indirect attempt to sell, assign, transfer, or dispose of the franchise agreement, the business, the store, the retail location, or any interest in the franchisee requires Gold Star's approval. This restriction applies to various forms of transfer, including those that occur voluntarily, involuntarily, by contract, will, merger, or operation of law.
A significant aspect of this transfer restriction is the concept of a "Change-in-Control," which occurs when 50% or more of the voting power of the franchisee changes hands. Gold Star aggregates all transfers of ownership interest from the date the entity became a franchisee to determine if a Change-in-Control has occurred, ensuring that franchisees cannot circumvent the transfer restrictions through incremental ownership changes.
However, there is an exception: a franchisee (if an individual) can transfer their interest to an entity formed solely for ownership convenience without Gold Star's consent, provided they give written notice and meet specific requirements. These requirements include ensuring the new entity's activities are confined to operating the business, that the entity's name does not contain "Gold Star Chili" or any similar mark, and that the franchisee and its principals comply with all requirements outlined in Section 17 of the franchise agreement. Even in the event of death or disability, the franchisee's interest must be transferred to a Gold Star-approved third party within six months, subject to the same transfer conditions.