Can a person or entity succeed to the rights of a Gold Star franchisee through bankruptcy?
Gold_Star Franchise · 2025 FDDAnswer from 2025 FDD Document
- 13.6 No Transfer by Operation of Law.
No person or entity shall succeed to any of the rights of FRANCHISEE under this Agreement by virtue of any voluntary or involuntary proceeding in bankruptcy, receivership, attachment, execution, assignment for the benefit of creditors or other legal process.
Any such attempt to so transfer FRANCHISEE's interest in this Agreement shall be null and void.
Source: Item 23 — Receipts (FDD pages 53–163)
What This Means (2025 FDD)
According to Gold Star's 2025 Franchise Disclosure Document, no person or entity can succeed to the rights of a Gold Star franchisee through bankruptcy.
Specifically, the franchise agreement states that no individual or entity can acquire the franchisee's rights through voluntary or involuntary bankruptcy proceedings, receivership, attachment, execution, assignment for the benefit of creditors, or other legal processes. Any attempt to transfer the franchisee's interest in the agreement through such means will be considered void.
This provision protects Gold Star by ensuring that the brand maintains control over who operates its franchises, even in situations where a franchisee faces financial difficulties. This is a fairly standard clause in franchise agreements, as franchisors want to avoid having a bankrupt entity or an unwanted third party take over a franchise location. Prospective franchisees should be aware that financial difficulties could lead to the termination of their franchise agreement, without the possibility of transferring the franchise rights through bankruptcy proceedings.