Is Gold Star obligated to continue its current practice regarding Franchisee supplier payments and rebate/allowance payments?
Gold_Star Franchise · 2025 FDDAnswer from 2025 FDD Document
Note 5: You must assign to Gold Star or its designee all product and/or advertising rebates or allowances that are granted to you by certain suppliers, as directed by Gold Star. Currently assignments are required with respect to our soft drinks supplier, with whom Gold Star has negotiated a group purchase arrangement. Although not obligated to do so by the Franchise Agreement or any related agreement, Gold Star's current practice is to have the assigned Franchisee supplier payments made (and to have all of the rebate or allowance payments from those suppliers receivable by Gold Star for company-owned Restaurants made) to GSCAA for use in the Brand Building Fund. Gold Star reserves the right to change this practice at any time without notice to its franchisees.
Source: Item 6 — OTHER FEES (FDD pages 12–18)
What This Means (2025 FDD)
According to Gold Star's 2025 Franchise Disclosure Document, Gold Star is not obligated to continue its current practice of having franchisee supplier payments made to GSCAA for use in the Brand Building Fund. While Gold Star currently assigns franchisee supplier payments, specifically with their soft drink supplier, to GSCAA for the Brand Building Fund, they explicitly state that they are not obligated to do so by the Franchise Agreement or any related agreement.
Gold Star retains the right to alter this practice at any time without prior notification to its franchisees. This means that the allocation of these payments could change, potentially impacting the funds available for brand building initiatives managed by GSCAA. GSCAA is Gold Star Chili Advertising Association, an Ohio nonprofit corporation. Gold Star is the sole member of GSCAA, and a majority of GSCAA's current board of trustees are officers, directors, employees or shareholders of Gold Star.
For a prospective franchisee, this indicates a degree of uncertainty regarding the future handling of supplier rebates and allowances. While currently these funds are directed towards the Brand Building Fund, Gold Star could decide to allocate them differently. This could affect the financial resources available for marketing and advertising efforts that benefit the entire franchise system. Therefore, it is important for potential franchisees to understand that the current arrangement is subject to change at Gold Star's discretion, and they should inquire about the potential implications of such changes on their business.