What is the relationship between the site selection obligations of the franchisee (Item 9) and the lack of exclusive territory granted by Gold Star (Item 12)?
Gold_Star Franchise · 2025 FDDAnswer from 2025 FDD Document
| Obligation | Section in Agreement | Disclosure Document Item |
|---|---|---|
| a. Site selection and | Sections 1, 4 and 5 of Franchise Agreement | Items 5, 7, 11 and |
| acquisition/lease | 17 | |
| k. Territorial development and | Section 1 of Franchise Agreement | Item 12 |
| sales quotas |
[Item 12: Territory]
You will not receive exclusive territory. You may face competition from other franchisees, from outlets that we own, or from other channels of distribution or competitive brands that we control.
Your Franchise is limited to the operation of 1 Gold Star Restaurant at a specific Retail Location, which must be approved by Gold Star. We agree not to operate or license another to operate a Gold Star Restaurant in a territory we designate in your Franchise Agreement (your "Protected Territory"), subject to our right to establish certain "Special Purpose Outlets" in the Protected Territory and to sell or distribute Gold Star products using the Marks through alternate distribution channels in the Protected Territory. A "Special Purpose Outlet" is a Gold Star Restaurant located inside a shopping mall or center, zoo, airport, race track, amusement park, fairgrounds, sports stadium, hospital, factory, bar, school, gas station, and special event. You are not granted (nor should you infer) any exclusive, protected, or territorial rights of any kind whatsoever outside of the Protected Territory, including any contiguous market area.
Each Franchise is granted only for a single Restaurant at a specified Retail Location. You select your site subject to Gold Star's approval. Gold Star can refuse to approve any proposed Retail Location for any reason or no reason solely in its discretion; and rejection need not be justified by any standard. Some factors considered by Gold Star in evaluating a proposed Retail Location include suitability of the neighborhood, proximity to other restaurants, population density, traffic flow, parking, customer draws in the immediate area and visibility of the proposed Retail Location from streets and parking facilities.
You do not receive the right to relocate your Franchise and must obtain Gold Star's prior written consent in order to change your Retail Location.
What This Means (2025 FDD)
According to Gold Star's 2025 Franchise Disclosure Document, the franchisee's site selection obligations, as detailed in Item 9, are directly related to the limited territorial protection described in Item 12. Item 9 indicates that franchisees are responsible for site selection, subject to Gold Star's approval. Gold Star has the discretion to reject any proposed retail location for any reason. This approval process is crucial because, as stated in Item 12, franchisees do not receive an exclusive territory.
The lack of an exclusive territory means that a Gold Star franchisee may face competition from other franchisees, company-owned outlets, or other distribution channels controlled by Gold Star. However, Gold Star does grant a "Protected Territory," the boundaries of which are determined by Gold Star based on factors like population density, earnings, and traffic counts. The franchisee's obligations in site selection, therefore, become even more critical because the success of the franchise depends heavily on choosing a location that can compete effectively within the limited protected territory, considering the potential for competition from various sources.
The interplay between site selection and territorial rights highlights the importance of thorough due diligence. A prospective Gold Star franchisee should carefully evaluate potential locations, considering the factors Gold Star uses in determining the Protected Territory. Furthermore, the franchisee should understand the potential for competition from other Gold Star outlets or alternative distribution channels when assessing the viability of a specific location. The franchisee also does not receive the right to relocate their franchise and must obtain Gold Star's prior written consent to change their retail location.