Can a Gold Star franchisee face competition from other distribution channels that Gold Star controls?
Gold_Star Franchise · 2025 FDDAnswer from 2025 FDD Document
There is no guarantee that future programs will be similar to past programs.
Item 12
Territory
You will not receive exclusive territory. You may face competition from other franchisees, from outlets that we own, or from other channels of distribution or competitive brands that we control.
Your Franchise is limited to the operation of 1 Gold Star Restaurant at a specific Retail Location, which must be approved by Gold Star. We agree not to operate or license another to operate a Gold Star Restaurant in a territory we designate in your Franchise Agreement (your "Protected Territory"), subject to our right to establish certain "Special Purpose Outlets" in the Protected Territory and to sell or distribute Gold Star products using the Marks through alternate distribution channels in the Protected Territory. A "Special Purpose Outlet" is a Gold Star Restaurant located inside a shopping mall or center, zoo, airport, race track, amusement park, fairgrounds, sports stadium, hospital, factory, bar, school, gas station, and special event. You are not granted (nor should you infer) any exclusive, protected, or territorial rights of any kind whatsoever outside of the Protected Territory, including any contiguous market area.
The size of your Protected Territory depends primarily upon the location of your Restaurant. The Protected Territory for a Special Purpose Outlet will be the relevant building or facility. The Protected Territory boundaries for other Restaurants are those set forth in Franchisees' Franchise Agreements. In determining Protected Territory boundaries, Gold Star evaluates a number of factors, including density of the population, earnings of the populace, and traffic counts.
Source: Item 12 — Territory (FDD pages 36–37)
What This Means (2025 FDD)
According to the 2025 Gold Star Franchise Disclosure Document, a Gold Star franchisee may face competition from other channels of distribution that Gold Star controls. Specifically, Gold Star retains the right to sell or distribute Gold Star products through alternate distribution channels within a franchisee's protected territory. These alternative channels include grocery stores, convenience stores, internet sales, direct mail, and catalog sales.
This means that even within a franchisee's protected territory, Gold Star can still operate or license others to operate "Special Purpose Outlets" such as those located inside shopping malls or centers, zoos, airports, race tracks, amusement parks, fairgrounds, sports stadiums, hospitals, factories, bars, schools, gas stations, and special events. However, if the franchisee's retail location is a Special Purpose Outlet, Gold Star will not operate or license another restaurant in the same building.
This lack of exclusive territory rights is a common practice in the franchise industry, allowing franchisors to maximize brand presence and market penetration through diverse channels. However, it's crucial for prospective franchisees to understand that their protected territory is not entirely exclusive, and they may face competition from other outlets or distribution methods controlled by Gold Star. Franchisees are also free to solicit customers or accept orders in any geographic area, just as Gold Star, its affiliates, and other franchisees may solicit customers or accept orders from anywhere, including a franchisee's protected territory or the territory of any other franchisee.
Gold Star also has established and plans to continue establishing company-owned outlets and other channels of distribution using the Marks, including company-owned Restaurants and distribution through grocery stores, convenience stores, other food service establishments, establishments or concessions located within other facilities (such as zoos, airports, race tracks, amusement parks, fairgrounds, sports stadiums, special events and the like) and food brokers, and also may expand through or establish other traditional and non-traditional distribution channels, methods and venues.