Does Gold Star have the right to retain fees paid by the franchisee upon termination?
Gold_Star Franchise · 2025 FDDAnswer from 2025 FDD Document
DGMENT, PROMISE, GUARANTEE, INDUCEMENT, UNDERTAKING OR WARRANTY (WRITTEN OR ORAL, EXPRESS OR IMPLIED) OTHER THAN THOSE EXPRESSLY SET FORTH IN THIS AGREEMENT, OR (B) ANY REPRESENTATIONS (WRITTEN OR ORAL, EXPRESS OR IMPLIED) AS TO THE ACTUAL, AVERAGE, POTENTIAL, PROJECTED OR FORECASTED SUCCESS, SALES, PROFITS, COSTS, INCOME OR EARNINGS OF A GOLD STAR CHILI RESTAURANT OR THE FRANCHISE BUSINESS TO BE CONDUCTED BY FRANCHISEE. FRANCHISEE FURTHER ACKNOWLEDGES THAT FRANCHISEE RECOGNIZES THAT THE NATURE OF THE BUSINESS CONDUCTED BY GOLD STAR CHILI RESTAURANTS MAY EVOLVE AND CHANGE OVER TIME; THAT FRANCHISEE'S INVESTMENT INVOLVES BUSINESS RISKS NOT SUSCEPTIBLE TO THE COMPANY'S OR FRANCHISEE'S CONTROL; AND THAT FRANCHISEE'S SUCCESS WILL BE LARGELY DEPENDENT ON FRANCHISEE'S OWN BUSINESS ABILITIES AND EFFORTS.
- 26. SURVIVAL OF TERMS AND CONDITIONS. The obligations of FRANCHISEE under Sections 11, 12, 16, and 19.3 hereof, and any other FRANCHISEE obligations herein that are stated to, or are of a type that would reasonably, survive or apply beyond termination or expiration of this Agreement, shall survive any termination or expiration of this Agreement; and expiration or termination of this Agreement shall be without prejudice to the rights of the COMPANY against FRANCHISEE thereunder and with respect to other like matters that reasonably would survive the end of a franchise relationship, and shall not relieve FRANCHISEE of any of FRANCHISEE's obligations to the COMPANY existing at the time of expiration or termination.
- 27. EXPENSES. If the COMPANY incurs any costs or expenses (including but not limited to attorneys' fees, court costs, other litigation expenses, settlement expenses or other expenses of any kind) in enforcing or protecting the COMPANY's rights under this Agreement, or any judgments, orders or awards relating thereto, or in preparation for or investigation or contemplation thereof, the COMPANY shall be entitled to recover from FRANCHISEE all such costs and expenses on demand, with interest from the date due pursuant to Section 8.3, above.
AS WITNESS the hands of the duly authorized representatives of the parties hereto as of the date of execution by Gold Star Chili, Inc. set forth below.
Source: Item 23 — Receipts (FDD pages 53–163)
What This Means (2025 FDD)
Based on the 2025 Gold Star Franchise Disclosure Document, the obligations of the franchisee related to specific sections of the agreement, along with any obligations that would reasonably survive termination, remain in effect even after the agreement ends. This includes the company's rights against the franchisee for matters that would reasonably survive the franchise relationship. Termination does not relieve the franchisee of obligations existing at the time of termination.
If Gold Star incurs costs to enforce its rights under the agreement, the franchisee is responsible for covering these expenses, including attorney's fees and court costs. These costs are subject to interest from the date they are due. This means that even after termination, a franchisee could be liable for significant costs if Gold Star has to take legal action to enforce the franchise agreement.
Additionally, if a franchisee abandons or discontinues the franchise before the agreement expires, they must pay Gold Star liquidated damages. This amount is calculated based on the average monthly continuing franchise fee payments from the previous twelve months, multiplied by either twenty-four or the number of months remaining in the agreement, whichever is less. This could result in a substantial payment to Gold Star, acting as a deterrent against early termination or abandonment of the franchise.