If any of the shareholders of a Gold Star franchisee become insolvent, does the franchise agreement terminate automatically?
Gold_Star Franchise · 2025 FDDAnswer from 2025 FDD Document
- 14.3 Termination without Notice.
This Agreement (except as otherwise provided in Section 26, below) and all rights granted to FRANCHISEE hereunder shall terminate without notice to FRANCHISEE if:
14.3.1 FRANCHISEE or any of its partners, members or shareholders becomes insolvent or liquidated or dissolves;
14.3.2 A receiver, trustee or similar creditor's representative is appointed for all or any part of the business, property or assets of FRANCHISEE, or any of its partners, members or shareholders;
14.3.3 FRANCHISEE or any of its partners, members or shareholders files a voluntary petition in bankruptcy, or any other proceeding under any federal or state insolvency or similar law; or consents to the filing of an involuntary petition or proceeding of such type, or makes an assignment for the benefit of creditors; or
14.3.4 An involuntary petition in bankruptcy or any other proceeding under any federal or state solvency or similar law is filed by any other person against FRANCHISEE or any of its shareholders, members or partners without its, his or her acquiescing therein and is not dismissed within sixty (60) days of filing.
Source: Item 23 — Receipts (FDD pages 53–163)
What This Means (2025 FDD)
According to Gold Star's 2025 Franchise Disclosure Document, the franchise agreement can be terminated without notice if a franchisee or any of its partners, members, or shareholders becomes insolvent. This also applies if they become liquidated or dissolved. This is a critical point for prospective franchisees to understand, as the financial stability of all parties involved in the franchise can directly impact the agreement's continuation.
Specifically, the agreement terminates without notice if a receiver, trustee, or similar creditor's representative is appointed for any part of the business, property, or assets of the franchisee or its stakeholders. Similarly, if the franchisee or any related party files a voluntary petition in bankruptcy or consents to an involuntary petition, the agreement can be terminated immediately.
Furthermore, if an involuntary bankruptcy petition is filed against the franchisee or its stakeholders and is not dismissed within 60 days, Gold Star has grounds for immediate termination. These conditions highlight the importance of maintaining financial solvency and stability, not only for the franchisee but also for all partners, members, and shareholders involved in the Gold Star franchise.