Is a Gold Star franchisee required to obtain confidentiality agreements from Related Parties?
Gold_Star Franchise · 2025 FDDAnswer from 2025 FDD Document
- 11.2 Application of Covenants to Related Parties. Upon the COMPANY's request, FRANCHISEE will require the following persons to execute covenants similar to those set forth in this Section 11 (including covenants applicable upon the termination of a person's relationship with FRANCHISEE): (1) all managers, officers and directors of FRANCHISEE; (2) all holders of a beneficial interest of 5% or more of the securities (including membership interests) of FRANCHISEE, and of any corporation or limited liability company directly or indirectly controlling FRANCHISEE, if FRANCHISEE is a corporation or limited liability company; and (3) all general partners of FRANCHISEE (including any corporation, and the officers, directors, and holders of a beneficial interest of 5% or more of the securities of any corporation which controls, directly or indirectly, any general partner), if FRANCHISEE is a partnership (collectively, "Related Parties"). Every covenant required by this Section 11 will be in a form satisfactory to the COMPANY. Failure by FRANCHISEE to obtain execution of a covenant required by this Section will constitute a default under Section 14.2.
Source: Item 23 — Receipts (FDD pages 53–163)
What This Means (2025 FDD)
According to Gold Star's 2025 Franchise Disclosure Document, franchisees are required to obtain confidentiality agreements from certain related parties upon the company's request. These related parties include managers, officers, and directors of the franchisee, holders of a beneficial interest of 5% or more of the franchisee's securities, and all general partners of the franchisee. These agreements ensure that confidential information regarding Gold Star's system and business operations remains protected.
The confidentiality agreements from related parties must be in a form satisfactory to Gold Star. Failure to obtain these agreements constitutes a default under the franchise agreement. This requirement underscores the importance Gold Star places on protecting its trade secrets and confidential information, which are vital to maintaining its competitive edge and the integrity of its brand.
This obligation means that prospective Gold Star franchisees need to be prepared to manage the process of securing these agreements from their related parties. They should also understand that non-compliance can lead to a breach of the franchise agreement, with potential consequences such as penalties or termination. Franchisees should factor in the administrative burden and potential legal costs associated with ensuring all related parties are in compliance with this requirement.