Can a Gold Star franchisee transfer their interest in the franchise without Gold Star's consent?
Gold_Star Franchise · 2025 FDDAnswer from 2025 FDD Document
INTEREST.**
- 13.1 Assignment by Company. This Agreement shall inure to the benefit of the COMPANY and its successors and assigns. The COMPANY may sell, transfer or assign this Agreement and any rights or duties hereunder to any third party at any time, and upon the giving of written notice to FRANCHISEE of any such transfer, COMPANY will have no further responsibility for the performance of any of the transferred obligations. FRANCHISEE shall execute any forms that the COMPANY may reasonably require in connection with any transfer or assignment by the COMPANY.
- 13.2 No Assignment by Franchisee. The COMPANY has granted this franchise in reliance on the individual or collective character, skill, aptitude and business and financial capacity of FRANCHISEE and its Principals. 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. A "Change-in-Control" transaction or series of transactions shall occur when 50% or more of the voting power of FRANCHISEE is vested in a person or persons (as applicable) different from the person or persons (as applicable) with whom 50% of voting power was vested immediately prior to the transaction or series of transactions. For purposes of this subparagraph, all transfers of an ownership interest in a nonindividual franchisee occurring since the date the entity first became a franchisee will be aggregated to determine whether a Change-in-Control has occurred.
- 13.3 Company's Right of First Refusal. Notwithstanding anything contained in this Agreement to the contrary, if FRANCHISEE or any Principal wishes to Transfer or accept an offer to Transfer, in any manner whatsoever, all or any part of any of the Restricted Assets, or any interest therein, FRANCHISEE or its Principals, as the case may be, will first obtain a bona fide, executed, written offer from a fullydisclosed purchaser and will submit an exact copy thereof to the COMPANY. After the receipt by the COMPANY of such offer, the COMPANY shall have thirty (30) days to purchase the Restricted Assets for the price and on the terms and conditions contained in the written proposed offer. Failure of the COMPANY to accept such offer within said thirty (30) days shall constitute a rejection (provided that the COMPANY may substitute cash for any form of payment proposed in such offer and shall have not less than sixty (60) days to prepare for
closing). If the COMPANY does not exercise its right of first refusal, FRANCHISEE or such transferor shall have ninety (90) days from the date of the COMPANY's rejection to Transfer the subject property in accordance with this Section, and subject to the COMPANY's approval pursuant to Section 13.4, below, but only upon terms and conditions no more favorable than those offered to the COMPANY. Before consummation of a Transfer to any third party, FRANCHISEE shall submit a copy of all Transfer documentation (signed by the parties, but expressly subject to the COMPANY's right of first refusal) to the COMPANY at least thirty (30) days in advance of any proposed consummation or closing date for the COMPANY's review and comparison with the offer previously submitted to it.
Source: Item 23 — Receipts (FDD pages 53–163)
What This Means (2025 FDD)
According to Gold Star's 2025 Franchise Disclosure Document, a franchisee generally cannot transfer their interest in the franchise without prior written consent from Gold Star. Gold Star has granted the franchise based on the franchisee's individual or collective character, skills, aptitude, and business and financial capacity. Therefore, any direct or indirect attempt to sell, assign, transfer, or convey any part of the franchise agreement, the business, the store, or any interest in the franchisee requires Gold Star's approval. This includes transfers through contracts, wills, mergers, stock issuance, or by law.
However, there is an exception to these transfer restrictions. If the franchisee is an individual, they may transfer their interest in the franchise to an entity formed solely for ownership convenience without Gold Star's consent, provided they give written notice and meet specific requirements. These requirements include that the newly formed entity's activities are confined to operating the business, its name does not include "Gold Star Chili" or any similar mark, and the franchisee complies with all requirements outlined in Section 17 of the franchise agreement.
Furthermore, any issuance or transfer of stock, membership, partnership, or other ownership interests in a franchisee entity (corporation, LLC, or partnership) is considered a transfer and requires compliance with the transfer provisions in Section 13 of the Gold Star franchise agreement. This ensures that any changes in ownership or control are subject to Gold Star's review and approval, maintaining the integrity and standards of the franchise system. Any attempt to transfer the franchisee's interest through bankruptcy or other legal processes is void.