Is a Gold Star franchisee prohibited from encumbering the store without the company's consent?
Gold_Star Franchise · 2025 FDDAnswer from 2025 FDD Document
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.
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 indeed restricted from encumbering their store without obtaining prior written consent from Gold Star. This restriction is explicitly stated within the section addressing the franchisee's inability to assign or transfer rights related to the franchise agreement.
Specifically, the franchisee cannot sell, assign, transfer, convey, issue, lease, pledge, mortgage, encumber, or make any disposition of the franchise agreement, the business, the store, the retail location, any lease, or any interest or share in the franchisee without Gold Star's prior written consent. This provision also extends to any transfer that results in a change of control, defined as when 50% or more of the voting power of the franchisee is vested in a different person or persons.
This requirement protects Gold Star by ensuring that the franchisee cannot take actions that could jeopardize the business or transfer control to an unsuitable party without the franchisor's knowledge and approval. For a prospective franchisee, this means that any significant financial or ownership changes affecting the store must be pre-approved by Gold Star, giving the company oversight over the franchisee's operations and financial dealings.