What is the geographic limit to Gold Star Chili's agreement not to compete unfairly with a licensee in Indiana?
Gold_Star Franchise · 2025 FDDAnswer from 2025 FDD Document
In recognition of the requirements of the Indiana Disclosure Law, Indiana Code §§ 23-2- 2.5-1 to 23-2-2.5-51 and the Indiana Deceptive Franchise Practices Act, Indiana Code §§ 23-2- 2.7-1 to 23-2-2.7-7, the parties to the attached Gold Star Chili, Inc. Franchise Agreement (the "Agreement") agree as follows:
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- Section 1 of the Agreement, under the heading "Grant of Franchise," shall be supplemented by the following subsection 1.7, which shall be considered an integral part of the Agreement:
- "C. No Unfair Competition. Licensor agrees that it shall not compete unfairly with Licensee within a reasonable area surrounding the approved location of the licensed location."
Source: Item 23 — Receipts (FDD pages 53–163)
What This Means (2025 FDD)
According to the 2025 Gold Star FDD, the franchisor agrees not to compete unfairly with a licensee within a "reasonable area surrounding the approved location of the licensed location" in Indiana. This agreement is part of an addendum to the standard franchise agreement required by Indiana state law. This addendum supplements Section 1 of the franchise agreement, specifically under the heading "Grant of Franchise," by adding subsection 1.7, which addresses unfair competition.
This means that Gold Star acknowledges the requirements of Indiana state laws regarding franchise disclosure and deceptive practices. To comply with these laws, Gold Star agrees not to engage in unfair competitive practices that could harm the franchisee's business within a certain area. The exact definition of a "reasonable area" is not specified in the FDD, which leaves room for interpretation and potential disputes.
Prospective franchisees in Indiana should seek clarification from Gold Star regarding what constitutes a "reasonable area" to avoid future misunderstandings. It would be prudent to negotiate a clear definition of this area during the franchise agreement process to ensure both parties have a shared understanding of the competitive restrictions. This could involve specifying a radius, geographic boundaries, or other measurable criteria to define the protected zone.