Does Gold Star have the obligation to assume the franchisee's leasehold interest upon termination or expiration of the lease?
Gold_Star Franchise · 2025 FDDAnswer from 2025 FDD Document
LEASE PROVISIONS
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- A provision that restricts the use of the premises solely to the operation of the franchised business;
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- A provision permitting the COMPANY to enter the Retail Location to de-identify the Business without penalty in accordance with Section 14 of this Agreement.
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- A provision requiring the landlord to provide the COMPANY with reasonable advanced notice if there is any contemplated termination and granting the COMPANY a reasonable amount of time, at the COMPANY's option, to avoid such termination (upon any such event, FRANCHISEE shall reimburse the COMPANY for all costs and expenses incurred in connection with such avoidance).
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- A provision that reserves to the COMPANY the right, but not the obligation, to assume FRANCHISEE's leasehold interest, with the right to sublease, upon termination or expiration of the lease or of this Agreement, without any assessment of additional fees, penalties, or rent acceleration; and
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- A provision that modifies the term of the lease so that it is coterminous with this Agreement.
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- A provision that gives the COMPANY the right, but not the obligation, to enter the premises or make modifications necessary to protect the Marks or the System or to cure any default under this Agreement; and
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- A provision that restricts the lease from being modified in a manner that could materially affect the COMPANY's rights with respect to the lease, without the COMPANY's prior written consent.
Source: Item 23 — Receipts (FDD pages 53–163)
What This Means (2025 FDD)
According to Gold Star's 2025 Franchise Disclosure Document, Gold Star does not have the obligation to assume the franchisee's leasehold interest upon termination or expiration of the lease. Exhibit B to the Franchise Agreement outlines lease provisions that may be included in the lease agreement between the franchisee and the landlord.
Specifically, one of these provisions reserves to Gold Star the right, but not the obligation, to assume the franchisee's leasehold interest. This right extends upon the termination or expiration of the lease or the Franchise Agreement itself. If Gold Star chooses to exercise this right, it can sublease the property without incurring additional fees, penalties, or rent acceleration.
This clause protects Gold Star by giving them the option to take over a favorable lease if a franchisee leaves or defaults, allowing them to maintain a presence in that location. However, it's not an obligation, so franchisees should not expect Gold Star to automatically assume the lease. Franchisees should carefully consider their lease obligations and exit strategy, as they remain responsible for the lease unless Gold Star exercises its option to assume it.