What is the geographic restriction on operating a similar business after the Gold Star Franchise Agreement terminates?
Gold_Star Franchise · 2025 FDDAnswer from 2025 FDD Document
11.1.3 Upon expiration or termination of this Agreement for any reason, or if FRANCHISEE assigns or transfers its interest in any Restricted Assets in any manner, then for a period of three (3) years thereafter, FRANCHISEE shall not, in any capacity whatsoever, either directly or indirectly, for itself, himself or herself, or through, on behalf of or in conjunction with any other person, partnership, limited liability company, corporation or organization, own, operate, maintain, engage in, participate in (as director, officer, manager, employee, consultant, representative, agent or otherwise) have any interest whatsoever in any Similar Business at a location within a radius of ten (10) miles of the Retail Location or any other Restaurant site then existing or approved for development.
11.1.4 During the term of this Agreement and all extensions or renewals thereof and for three (3) years thereafter, FRANCHISEE shall not, directly or indirectly: (a) divert or attempt to divert any of the COMPANY's business or any of the COMPANY's customers to any Similar Business; (b) induce COMPANY employees to leave their employment with the COMPANY; or (c) do or perform any other act injurious or prejudicial to the COMPANY's goodwill associated with its Marks and System.
FRANCHISEE acknowledges and confirms that the time, content and geographical restrictions contained in this Section are fair and reasonable. They are not the result of overreaching, duress, or coercion of any kind by the COMPANY. FRANCHISEE further acknowledges and confirms that FRANCHISEE's observance of the covenants contained in this Agreement will not cause FRANCHSIEE any undue hardship, financial or otherwise, and that enforcement of each of the covenants contained in this Agreement will not impair FRANCHISEE's ability to obtain employment commensurate with FRANCHIEE's abilities and on terms fully acceptable to FRANCHSIEE.
Source: Item 23 — Receipts (FDD pages 53–163)
What This Means (2025 FDD)
According to Gold Star's 2025 Franchise Disclosure Document, if the Franchise Agreement is terminated, the franchisee is restricted from operating a similar business within a specific geographic area. Specifically, for a period of three years after the termination, the franchisee cannot own, operate, maintain, engage in, or participate in any capacity in a similar business. This restriction applies to locations within a 10-mile radius of the original Gold Star Retail Location or any other existing or approved Gold Star restaurant site.
This non-compete clause prevents former franchisees from directly competing with Gold Star within a defined area, protecting Gold Star's market share and brand recognition. The restriction applies regardless of the reason for termination, whether it's due to expiration, breach, or any other cause. The franchisee also acknowledges that these restrictions are fair and reasonable and do not pose an undue hardship on their ability to find suitable employment.
For a prospective Gold Star franchisee, this means that upon exiting the franchise system, they will be unable to leverage their experience and knowledge to start a competing business nearby. This could limit their future business opportunities and career options in the restaurant industry within that specific geographic area. It is important to fully understand the implications of this non-compete agreement before signing the Franchise Agreement.
It is common practice in the franchise industry to include non-compete clauses to protect the franchisor's business interests. The duration and geographic scope of these clauses can vary, so it's crucial for potential franchisees to carefully review and understand these terms before investing in a franchise.