What provisions regarding transfer restrictions must be included in Gold Star partnership and operating agreements?
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.
Source: Item 23 — Receipts (FDD pages 53–163)
What This Means (2025 FDD)
According to the 2025 Gold Star Franchise Disclosure Document, if a franchisee is a partnership, all partnership agreements and operating agreements must contain provisions that restrict the issuance or transfer of any stock, membership, partnership, or other ownership interests without adhering to the conditions outlined in Section 13 of the franchise agreement. This restriction also requires each stockholder, member, or partner to agree in writing not to issue, assign, transfer, pledge, sell, or otherwise convey any part of their capital stock, membership interest, or partnership interest in the franchise without complying with Gold Star's rights as detailed in Section 13. Any issuance or transfer of equity will be considered a transfer under Section 13.
This requirement ensures that Gold Star maintains control over who becomes a franchisee or partner within a franchise location. By including these restrictions in the partnership and operating agreements, Gold Star aims to prevent unauthorized transfers of ownership that could compromise the brand's standards or introduce unsuitable operators.
For a prospective Gold Star franchisee, this means that if they plan to operate their franchise as a partnership, they must ensure that their partnership and operating agreements explicitly state these transfer restrictions. Furthermore, all partners must sign agreements acknowledging and agreeing to these restrictions. This requirement is not uncommon in franchising, as franchisors typically want to maintain control over who is involved in the operation of their franchised locations to protect their brand and system standards.