Is a Gold Star franchisee subject to competition from outlets that Gold Star owns?
Gold_Star Franchise · 2025 FDDAnswer from 2025 FDD Document
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.
Source: Item 12 — Territory (FDD pages 36–37)
What This Means (2025 FDD)
According to Gold Star's 2025 Franchise Disclosure Document, a franchisee may face competition from outlets that Gold Star owns. While a franchisee is granted a protected territory, Gold Star retains the right to establish "Special Purpose Outlets" within that territory. These Special Purpose Outlets can include Gold Star Restaurants located inside shopping malls, zoos, airports, and other similar venues.
This means that even within a franchisee's protected territory, Gold Star could potentially open company-owned restaurants in certain locations, creating direct competition. Additionally, Gold Star can sell or distribute Gold Star products through alternate distribution channels within the protected territory, further increasing potential competition for the franchisee. These alternate channels include grocery stores, convenience stores, and other food service establishments.
Prospective franchisees should carefully consider the implications of this non-exclusive territory. While a protected territory is provided, the presence of Special Purpose Outlets and alternate distribution channels could impact the franchisee's sales and profitability. It is important to understand the potential locations for these Special Purpose Outlets and the extent to which Gold Star intends to utilize alternate distribution channels in the area. Franchisees should discuss with Gold Star what their plans are for company-owned restaurants and other distribution methods in the franchisee's target market to fully assess the competitive landscape.