What is the Gold Star franchisee's responsibility to prevent disclosure of confidential information by those under their control?
Gold_Star Franchise · 2025 FDDAnswer from 2025 FDD Document
o 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 to use its best efforts to take the necessary precautions to prevent such disclosure, then FRANCHISEE shall pay to the COMPANY for each and every breach of this covenant, the sum of One Hundred Thousand Dollars ($100,000) as liquidated damages and not as a penalty. The parties acknowledge that the precise amount of COMPANY's actual damages would be extremely difficult to ascertain and that the foregoing sum represents a reasonable pre-estimate of such actual damages. Nothing contained herein shall preclude the COMPANY from seeking injunctive or other relief.
**13.
Source: Item 23 — Receipts (FDD pages 53–163)
What This Means (2025 FDD)
According to Gold Star's 2025 Franchise Disclosure Document, franchisees have a significant responsibility to protect confidential information and prevent its disclosure by those under their control. The franchisee must keep confidential the information contained in the Manual, and other information about the Proprietary Products, the System and the Business, including customer and supplier lists. This information is considered proprietary and highly confidential trade secrets. The franchisee can only use this information as necessary to operate the business according to the Franchise Agreement.
Gold Star franchisees must obtain an agreement from related parties to keep confidential the confidential materials and to only use them as necessary to operate the business. If a franchisee fails to use its best efforts to prevent the disclosure of confidential material by related parties or anyone under their control, and such a disclosure occurs, the franchisee will have to pay Gold Star $100,000 as liquidated damages for each breach. This is designed to cover the estimated damages to Gold Star, but Gold Star can also seek injunctive relief or other remedies.
This obligation extends to preventing unauthorized use of confidential material by related parties or any third party. Franchisees must promptly inform Gold Star in writing if they become aware of any claims or unauthorized use of confidential material. This includes trade secrets, customer lists, and other proprietary information. This means a Gold Star franchisee must actively monitor and take preventative measures to ensure that those associated with their business do not disclose confidential information, or they could face substantial financial penalties.