Can a Gold Star franchisee designate how the company applies their payments?
Gold_Star Franchise · 2025 FDDAnswer from 2025 FDD Document
Notwithstanding any designation by FRANCHISEE, the COMPANY shall have sole discretion to apply any payments by FRANCHISEE to any past due obligations of FRANCHISEE to the
- COMPANY or its affiliates in such manner and order as the COMPANY deems appropriate in its sole discretion.
Source: Item 23 — Receipts (FDD pages 53–163)
What This Means (2025 FDD)
According to Gold Star's 2025 Franchise Disclosure Document, while a franchisee may attempt to designate how their payments are applied, Gold Star has the ultimate authority to allocate those payments as it sees fit. Specifically, Gold Star can apply payments to any past due obligations the franchisee has to the company or its affiliates.
This means that even if a Gold Star franchisee specifies that a payment should cover a particular invoice or fee, Gold Star can instead use that payment to settle older outstanding debts. This could include franchise fees, advertising fees, or any other financial obligations the franchisee owes to Gold Star or its related entities.
This policy protects Gold Star by ensuring they can prioritize the collection of overdue amounts. However, it also places the risk on the franchisee, who may believe they are current on certain payments, only to find that Gold Star has applied their money to older debts, potentially leading to late fees or other penalties on the payments the franchisee thought they were covering. Franchisees need to maintain meticulous records and communicate proactively with Gold Star to avoid misunderstandings about payment allocation.
It is a fairly common practice in franchising for franchisors to reserve the right to allocate payments to outstanding debts at their discretion. This clause underscores the importance of franchisees staying current with all financial obligations to avoid losing control over how their payments are applied.