Is issuing additional stock by a Gold Star franchisee considered a transfer?
Gold_Star Franchise · 2025 FDDAnswer from 2025 FDD Document
If FRANCHISEE or any proposed transferee is a corporation, limited liability company or partnership, such entity shall not issue any additional stock, membership, partnership or other ownership interests or permit any transfer of any such interest, and each stockholder, member or partner thereof shall, in writing, agree not to issue, assign, transfer, pledge, sell or otherwise convey all or part of any capital stock, membership interest or partnership interest in FRANCHISEE or such transferee, without compliance with the rights of the COMPANY set forth under this Section 13.
For the purpose of clarity, any such issuance or transfer will be considered a "Transfer" pursuant to
- this Section 13.
All partnership agreements and operating agreements shall contain provisions setting forth the foregoing restrictions.
All stock certificates shall have endorsed on them the legend set forth in Section 17.4, below.
Source: Item 23 — Receipts (FDD pages 53–163)
What This Means (2025 FDD)
According to Gold Star's 2025 Franchise Disclosure Document, the issuance of additional stock, membership, partnership, or other ownership interests by a franchisee is considered a transfer. Specifically, if the franchisee is a corporation, limited liability company, or partnership, they cannot issue any additional stock, membership, partnership, or other ownership interests, or permit any transfer of such interests, without complying with Gold Star's rights as outlined in Section 13 of the franchise agreement. Each stockholder, member, or partner must agree in writing not to issue, assign, transfer, pledge, sell, or otherwise convey any capital stock, membership interest, or partnership interest in the franchisee without Gold Star's compliance.
This restriction is clearly stated to ensure that any issuance or transfer of equity is explicitly considered a "Transfer" under Section 13 of the agreement. This provision aims to maintain control over who has ownership in a Gold Star franchise and ensures that all ownership changes are subject to the franchisor's approval. The partnership and operating agreements must contain provisions that set forth these restrictions, and all stock certificates must have a specific legend endorsed on them, referencing the franchise agreement and its restrictive provisions.
For a prospective franchisee, this means that if the franchise entity is a corporation, LLC, or partnership, any changes in ownership, even through the issuance of new stock or membership interests, are subject to Gold Star's approval. This requirement is designed to protect the integrity of the Gold Star brand and ensure that all owners meet the franchisor's standards. Franchisees need to be aware that failure to comply with these transfer restrictions could result in a breach of the franchise agreement.