What happens if a Gold Star franchisee breaches the provisions regarding transfer of the franchise?

According to the 2025 Gold Star Franchise Disclosure Document, if a franchisee violates the transfer provisions outlined in Section 13 of the franchise agreement, it constitutes a breach of the agreement. Specifically, section 14.4.5 states that a breach of any provision of Section 13 regarding transfer is grounds for default.

Section 13 outlines the conditions under which a Gold Star franchisee can transfer their interest in the franchise. These conditions include obtaining Gold Star's consent, paying a transfer fee (currently $3,500), and ensuring the transferee executes Gold Star's current franchise agreement. There are also exceptions to these restrictions, such as transferring the interest to an entity formed solely for ownership convenience, provided certain conditions are met. The agreement also clarifies that any attempt to transfer the franchisee's interest through bankruptcy or other legal processes is void.

Furthermore, if the franchisee is a corporation, limited liability company, or partnership, they cannot issue additional stock or ownership interests or permit any transfer of such interests without complying with Section 13. Any such issuance or transfer is considered a breach. All partnership and operating agreements must contain provisions setting forth these restrictions, and all stock certificates must include a specific legend indicating the transfer restrictions.

In practical terms, any unauthorized transfer or attempt to circumvent the transfer restrictions could lead to default of the franchise agreement. This could potentially result in termination of the franchise and loss of the franchisee's investment. Therefore, it is crucial for prospective Gold Star franchisees to fully understand and comply with the transfer provisions outlined in Section 13 to avoid any breach of contract.