What is the relationship between the trademarks licensed by Gold Star (Item 13) and the franchisee's ability to differentiate their business from competitors in a non-exclusive territory (Item 12)?
Gold_Star Franchise · 2025 FDDAnswer from 2025 FDD Document
There is no guarantee that future programs will be similar to past programs.
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.
The size of your Protected Territory depends primarily upon the location of your Restaurant. The Protected Territory for a Special Purpose Outlet will be the relevant building or facility. The Protected Territory boundaries for other Restaurants are those set forth in Franchisees' Franchise Agreements. In determining Protected Territory boundaries, Gold Star evaluates a number of factors, including density of the population, earnings of the populace, and traffic counts.
Gold Star has established and plans to continue establishing company-owned outlets and other channels of distribution using the Marks, including company-owned Restaurants and distribution through grocery stores, convenience stores, other food service establishments, establishments or concessions located within other facilities (such as zoos, airports, race tracks, amusement parks, fairgrounds, sports stadiums, special events and the like) and food brokers, and also may expand through or establish other traditional and non-traditional distribution channels, methods and venues.
You do not receive the right to acquire additional Franchises within your Protected Territory, or contiguous territories or anywhere else. 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.
You are free to solicit customers or accept orders in any geographic area, just as Gold Star, its affiliates and other Franchisees may solicit customers or accept orders from anywhere, including your Protected Territory or the territory of any other Franchisee.
Neither Gold Star nor any affiliate of Gold Star operates or franchises, or has any present plans to operate or franchise, any business selling or leasing under different trade names or trademarks, goods or services similar to those to be offered by you.
The continuation of your Protected Territory rights is not dependent upon the achievement of a certain sales volume, market penetration or other contingency.
What This Means (2025 FDD)
According to Gold Star's 2025 Franchise Disclosure Document, franchisees are licensed to use specific trademarks to identify their franchise business, but they operate in a non-exclusive territory. This means that while franchisees can use the "Gold Star" and "Gold Star Chili" trademarks to brand their restaurants, they may face competition from other franchisees, company-owned outlets, or other distribution channels controlled by Gold Star. This non-exclusivity affects a franchisee's ability to fully differentiate their business based solely on territory. The trademarks help establish brand recognition, but the lack of an exclusive territory means that multiple Gold Star locations can operate in the same general area.
Gold Star may establish "Special Purpose Outlets" within a franchisee's protected territory, such as those located in shopping malls, airports, or sports stadiums. Gold Star also retains the right to distribute products through alternative channels like grocery stores or convenience stores within the protected territory. These actions can further limit a franchisee's ability to differentiate their business based on location or product exclusivity. The franchisee's protected territory size depends primarily on the restaurant's location, with specific boundaries outlined in the Franchise Agreement, considering factors like population density and traffic counts.
While franchisees do not have exclusive territorial rights, they are granted a "Protected Territory" where Gold Star agrees not to operate or license another to operate a Gold Star Restaurant, subject to the Special Purpose Outlets and alternative distribution channels exceptions. Franchisees cannot acquire additional franchises within their protected territory or relocate without Gold Star's written consent. The trademarks, therefore, become a crucial element in attracting and retaining customers, as the territory itself does not guarantee a monopoly.
In summary, the trademarks licensed by Gold Star are vital for brand identity and customer recognition, but the non-exclusive territory means franchisees must compete with other Gold Star outlets and alternative distribution channels. The trademarks help differentiate the business from non-Gold Star competitors, but within the Gold Star system, differentiation relies more on operational excellence and customer service than exclusive territorial rights.