How is the initial franchise fee determined when opening a transferred Gold Star restaurant?
Gold_Star Franchise · 2025 FDDAnswer from 2025 FDD Document
y the COMPANY, including without limitation, downloading and subscribing to third-party software, and will from time to time execute such agreements and/or acknowledge and agree to comply with such policies concerning the use of the extranet as the COMPANY may prepare.
8. FRANCHISE FEES AND OTHER PAYMENTS.
- 8.1 Payments by Franchisee. In consideration of the issuance of the franchise granted hereunder, FRANCHISEE shall pay to the COMPANY:
- 8.1.1 If FRANCHISEE is opening a New Restaurant (defined below) and FRANCHISEE is not party to one or more franchise agreements with the COMPANY, an initial franchise fee in the amount of Fifty Thousand Dollars ($50,000.00);
- 8.1.2 If FRANCHISEE is opening a New Restaurant and FRANCHISEE is currently party to at least one (1) and less than five (5) franchise agreements with the COMPANY and is not, as of the date hereof, in default under any such agreement(s), an initial franchise fee of Twenty Five Thousand Dollars ($25,000.00),
- 8.1.3 If FRANCHISEE is opening a New Restaurant and FRANCHISEE is currently party to five (5) or more franchise agreements with the COMPANY and is not, as of the date hereof, in default under any such agreements, an initial franchise fee of Ten Thousand Dollars ($10,000.00), and
- 8.1.4 If FRANCHISEE is entering into this Agreement as a renewal of a previous franchise agreement between FRANCHISEE and the COMPANY, a renewal fee of Five Thousand Dollars ($5,000.00).
- 8.1.5 If FRANCHISEE is opening a Transferred Restaurant (defined below), and is not, as of the date hereof, in default under any other franchise agreements between FRANCHISEE and the COMPANY, the lesser of the initial franchise fee FRANCHISEE would be required to pay if the Transferred Restaurant were a New Restaurant pursuant to Sections 8.1.1 through 8.1.3 and Twenty Five Thousand Dollars ($25,000).
Source: Item 23 — Receipts (FDD pages 53–163)
What This Means (2025 FDD)
According to Gold Star's 2025 Franchise Disclosure Document, the initial franchise fee for opening a transferred restaurant depends on whether the franchisee is in default under any other franchise agreements with Gold Star. If the franchisee is not in default, the initial franchise fee is the lesser of two amounts. The first amount is what the initial franchise fee would be if the transferred restaurant were a new restaurant, based on the number of existing Gold Star franchises the franchisee already operates. The second amount is $25,000.
To determine the fee as if it were a new restaurant, Gold Star considers how many existing franchise agreements the franchisee has with the company. If the franchisee has fewer than one existing franchise agreement, the initial franchise fee would be $50,000. If the franchisee has at least one but fewer than five existing franchise agreements, the initial franchise fee would be $25,000. If the franchisee has five or more existing franchise agreements, the initial franchise fee would be $10,000.
Therefore, for a transferred restaurant, the initial franchise fee will be the lesser of either $25,000 or the amount calculated as if it were a new restaurant. This fee is payable upon the execution of the franchise agreement and is considered fully earned by Gold Star at that time, and is nonrefundable. A "Transferred Restaurant" is defined as a restaurant that will be operated from a premises upon which a Gold Star Chili Restaurant was operating at any time during the previous six months.