What restriction applies to the issuance, transfer, or assignment of shares or other interest in the Gold Star franchisee?
Gold_Star Franchise · 2025 FDDAnswer from 2025 FDD Document
s Agreement as Exhibit D.
- 17.2 Personal Guaranty. Upon the execution of this Agreement and upon each Transfer of an interest in this franchise or in FRANCHISEE, all Principals of FRANCHISEE shall execute a Personal Guaranty in substantially the form of Exhibit C attached hereto, personally guaranteeing, jointly and severally with all other guarantors, the full payment of all monies due and owing and performance
of all FRANCHISEE's other obligations hereunder, and undertake to be bound by Sections 11, 12 and 13 of this Agreement. If FRANCHISEE consists of more than one individual, each such individual must execute this Agreement and shall be jointly and severally liable as FRANCHISEE hereunder.
- 17.3 Governance Documents. The partnership agreement, articles of incorporation, articles of organization, operating agreement, bylaws and other organization documents of FRANCHISEE shall recite that the issuance and transfer of any interest therein is restricted by the terms of Section 13 of the Agreement. FRANCHISEE shall also submit to the COMPANY, upon the execution of this Agreement, resolutions from the applicable governing body of FRANCHISEE which authorize the execution, delivery and performance of this Agreement and the transactions contemplated hereby and states, in form and substance, that no shares or other interest in FRANCHISEE shall be issued, transferred or assigned to any person or legal entity except according to the terms of this Agreement.
- 17.4 Securities Legend. FRANCHISEE, if it is a corporation or limited liability company, shall issue no securities upon the face of which the printed legend in the following form and substance does not legibly and conspicuously appear: "The transfer of these [shares/interests/units] is subject to the terms and conditions of one or more Franchise Agreements with Gold Star Chili, Inc. Reference is hereby made to such Franchise Agreement(s) and to the restrictive provisions of the Articles and Regulations of this [corporation/limited liability company]. Copies of such Agreements and restrictions are available at the offices of the [corporation/limited liability company]."
18. INSURANCE.
18.1 General Insurance.
Source: Item 23 — Receipts (FDD pages 53–163)
What This Means (2025 FDD)
According to the 2025 Gold Star FDD, franchisees face significant restrictions on issuing or transferring equity in their franchise. Gold Star maintains considerable control over who can become an owner, aiming to protect the brand's integrity and consistency.
The FDD states that if a franchisee is a corporation, limited liability company, or partnership, they cannot issue additional stock, membership, partnership, or other ownership interests without complying with Gold Star's transfer requirements. Each stockholder, member, or partner must agree in writing not to issue, assign, transfer, pledge, sell, or otherwise convey any capital stock, membership interest, or partnership interest without Gold Star's consent. This means that any change in ownership, even a small percentage, is subject to Gold Star's approval.
Furthermore, the franchisee's governing documents (partnership agreement, articles of incorporation, etc.) must explicitly state that the issuance and transfer of any interest are restricted by the terms of the franchise agreement. Stock certificates issued by corporate or LLC franchisees must include a legend indicating that the transfer of shares/interests/units is subject to the terms and conditions of the franchise agreement with Gold Star. These measures ensure that potential investors are aware of the restrictions before acquiring any interest in the franchise.
Gold Star also requires that any proposed transferee comply with the company's rights as outlined in Section 13 of the franchise agreement. These restrictions are designed to allow Gold Star to carefully vet potential new owners and ensure they meet the company's standards. Any attempt to transfer interest without this compliance is considered void, giving Gold Star significant power over the ownership structure of its franchises.