Does the restriction on operating a similar business after the Gold Star Franchise Agreement applies to locations near approved but not yet built Gold Star restaurants?
Gold_Star Franchise · 2025 FDDAnswer from 2025 FDD Document
preparation or sale of any food items similar to the Products or any other business similar to the Restaurants, the Business or the System or that offers or grants franchises or licenses to others to operate such a business.
- 11.1.2 During the term of this Agreement and all extensions of renewal thereof and for three (3) years thereafter, FRANCHISEE shall not let or permit any part of any premises owned or controlled by FRANCHISEE in the Protected Territory to be used for a business, all or any part of which consists of a Similar Business.
- 11.1.3 Upon expiration or termination of this Agreement for any reason, or if FRANCHISEE assigns or transfers its interest in any Restricted Assets in any manner, then for a period of three (3) years thereafter, FRANCHISEE shall not, in any capacity whatsoever, either directly or indirectly, for itself, himself or herself, or through, on behalf of or in conjunction with any other person, partnership, limited liability company, corporation or organization, own, operate, maintain, engage in, participate in (as director, officer, manager, employee, consultant, representative, agent or otherwise) have any interest whatsoever in any Similar Business at a location within a radius of ten (10) miles of the Retail Location or any other Restaurant site then existing or approved for development.
Source: Item 23 — Receipts (FDD pages 53–163)
What This Means (2025 FDD)
According to Gold Star's 2025 Franchise Disclosure Document, the post-term restriction on operating a similar business applies to locations near Gold Star restaurants that are either existing or approved for development. Specifically, after the Franchise Agreement expires or terminates, or if the franchisee transfers interest in restricted assets, the franchisee cannot be involved in a similar business within a 10-mile radius of their Retail Location or any other Gold Star site that exists or is approved for development. This restriction lasts for three years.
This means that a franchisee is restricted from opening a competing business not only near their own Gold Star location but also near any other existing Gold Star restaurant or any site that Gold Star has already approved for future development. The restriction applies regardless of whether the approved site has actually been built and opened. This is designed to protect Gold Star's market presence and prevent former franchisees from directly competing with existing or planned locations.
The agreement emphasizes that the franchisee acknowledges the fairness and reasonableness of these restrictions, confirming they are not the result of overreach or duress by Gold Star. The franchisee also acknowledges that adhering to these covenants will not cause undue hardship and will not impair their ability to find suitable employment. This acknowledgement is likely intended to reinforce the enforceability of these restrictions.
Prospective franchisees should carefully consider the implications of this non-compete clause, especially if they envision opening another restaurant in the future. Understanding the geographical limitations and the duration of the restriction is crucial for making an informed decision about investing in a Gold Star franchise.