If a Gold Star franchisee is a nonindividual entity, how are ownership transfers tracked for Change-in-Control purposes?
Gold_Star Franchise · 2025 FDDAnswer from 2025 FDD Document
ned or leased), any Lease, any interest or share in FRANCHISEE which results in a Change-in-Control (defined below), or all or a material part of the assets, real or personal, tangible or intangible, pertaining to the Store or the Business. A "Change-in-Control" transaction or series of transactions shall occur when 50% or more of the voting power of FRANCHISEE is vested in a person or persons (as applicable) different from the person or persons (as applicable) with whom 50% of voting power was vested immediately prior to the transaction or series of transactions.
Source: Item 23 — Receipts (FDD pages 53–163)
What This Means (2025 FDD)
According to Gold Star's 2025 Franchise Disclosure Document, when a Gold Star franchisee is a nonindividual entity (like a corporation or LLC), all ownership transfers occurring since the date the entity first became a franchisee are aggregated to determine if a Change-in-Control has occurred. A Change-in-Control is defined as when 50% or more of the voting power of the franchisee is vested in a person or persons different from those who held it before.
This means that Gold Star monitors the cumulative effect of ownership changes in nonindividual franchisees. Even if no single transaction exceeds the 50% threshold, multiple smaller transfers can collectively trigger a Change-in-Control, requiring franchisor approval. This provision aims to ensure that Gold Star retains control over who ultimately owns and operates its franchises, even when the ownership is held through a business entity.
For a prospective Gold Star franchisee, especially those planning to operate under a corporate structure, this has significant implications. It means that any future changes in ownership, even minor ones, must be carefully tracked and disclosed to Gold Star. Failure to do so could result in a violation of the franchise agreement. Franchisees need to maintain detailed records of all ownership transfers and understand that Gold Star's consent is required before any transfer that, cumulatively, results in a change in control. This requirement is stricter than if the franchisee was an individual, in which case the transfer restrictions may be more relaxed for transfers to an entity formed solely for ownership convenience.