What is the geographic scope of the non-competition covenant after a Gold Star franchise is terminated or expires?
Gold_Star Franchise · 2025 FDDAnswer from 2025 FDD Document
| Provision | Section in | Summary |
|---|---|---|
| r. Non-competition covenants after the Franchise is terminated or expires | Section 11 | No competing business for 3 years and within 10 miles of your Retail Location or any other Gold Star (existing or approved) franchise (including after assignment); no part of any owned or controlled premises in your Protected Territory to be used to any extent for any competing business for 3 years |
Source: Item 17 — Renewal, Termination, Transfer, and Dispute Resolution (FDD pages 42–45)
What This Means (2025 FDD)
According to Gold Star's 2025 Franchise Disclosure Document, if the franchise agreement is terminated or expires, the franchisee is subject to a non-competition covenant. This covenant restricts the franchisee from engaging in a competing business for a period of 3 years. The geographic scope of this restriction extends to within 10 miles of the franchisee's Retail Location or any other existing or approved Gold Star franchise, even after assignment. Additionally, the franchisee is prohibited from allowing any part of any owned or controlled premises in their Protected Territory to be used for any competing business for 3 years.
This means that upon termination or expiration of the franchise agreement, a former Gold Star franchisee cannot operate or be involved in a competing business within the specified area. This restriction aims to protect Gold Star's market share and brand recognition by preventing former franchisees from leveraging their knowledge and experience gained during the franchise term to compete against the Gold Star system. The non-compete extends not only to the franchisee's original location but also to any other Gold Star franchise within a 10-mile radius, ensuring a broader protection for the brand.
Prospective franchisees should carefully consider the implications of this non-competition covenant. It could significantly limit their business opportunities after leaving the Gold Star system, especially if they intend to remain in the same geographic area and industry. Franchisees should also be aware that these non-compete agreements can vary by state, as noted in Note 2, and consulting with a legal advisor is recommended to understand the specific enforceability and implications in their jurisdiction.