What is the Gold Star franchisee's obligation regarding precautions to prevent disclosure of confidential information by related parties?
Gold_Star Franchise · 2025 FDDAnswer from 2025 FDD Document
r of all rights in and to the System, and the Confidential Material, and that the System and the Confidential Material constitute trade secrets of the COMPANY which are revealed to FRANCHISEE in confidence, and that no right is given to or acquired by FRANCHISEE to, and FRANCHISEE shall not, disclose, duplicate, license, sell or reveal any of such Confidential Material to any person, other than disclosure to an employee of FRANCHISEE to the extent required by his/her work in accordance with this Agreement to be familiar with relevant Confidential Material. FRANCHISEE agrees to keep confidential such Confidential Material, and, upon the COMPANY's request, to obtain from each of the Related Parties an agreement to keep the Confidential Materials confidential and not to use the Confidential Materials except as necessary in the operation of the Business. FRANCHISEE will advise the COMPANY promptly in writing if FRANCHISEE learns of any claims made relating to or unauthorized use of any Confidential Material whether by a Related Party or a third party. The COMPANY is not obligated to take any action but may take any action it deems appropriate. FRANCHISEE also agrees not to contest or aid in contesting, directly or indirectly, the COMPANY's right, title, ownership or interest in or to, or the validity or enforceability of, any copyrights, Confidential Material or the System, or contest the COMPANY's sole right to register, use or franchise or license others to use any such copyrights, the System or the Confidential Material, during or after the term of this Agreement or any extension or renewal thereof.
- 12.2 Damages for Violations. If FRANCHISEE discloses any Confidential Material to any person, firm or entity or otherwise breaches its obligations under this Section 12, or if one of the Related Parties or any other person subject to FRANCHISEE's control makes such a disclosure or otherwise breaches its obligations under this Section 12 as a result of the failure of FRANCHISEE
Source: Item 23 — Receipts (FDD pages 53–163)
What This Means (2025 FDD)
According to the 2025 Gold Star Franchise Disclosure Document, franchisees must take precautions to prevent the disclosure of confidential information by related parties. Specifically, Gold Star requires franchisees to obtain an agreement from related parties to keep confidential materials confidential and to only use them as necessary for business operations. Related parties include the franchisee's family members, employees, and other individuals or entities associated with the franchisee.
If a franchisee fails to take the necessary precautions to prevent the disclosure of confidential material by related parties, and such a disclosure occurs, the franchisee is obligated to pay Gold Star $100,000 as liquidated damages for each breach. This substantial fee underscores the importance Gold Star places on maintaining the confidentiality of its proprietary information and system. However, Gold Star may also seek injunctive or other relief.
This requirement means that prospective Gold Star franchisees must implement robust confidentiality protocols and ensure that all related parties understand and agree to abide by them. Franchisees should consult with legal counsel to develop appropriate agreements and procedures to protect Gold Star's confidential information and avoid potential liability. This could include training programs, confidentiality agreements, and monitoring systems to detect and prevent unauthorized disclosures.
Gold Star retains the right to take any action it deems appropriate if a franchisee learns of any claims made relating to or unauthorized use of any Confidential Material whether by a Related Party or a third party. Franchisees also agree not to contest Gold Star's right, title, ownership or interest in or to, or the validity or enforceability of, any copyrights, Confidential Material or the System.