What is the scope of the license granted to a Gold Star franchisee under the franchise agreement?
Gold_Star Franchise · 2025 FDDAnswer from 2025 FDD Document
- 1.3 Protected Territory.
Except for the protections provided in this Section 1.3, the franchise and other rights granted herein are non-exclusive.
The COMPANY agrees not to operate or license another to operate a Restaurant within the territory defined on the cover page hereof (the "Protected Territory") so long as FRANCHISEE: (i) fully complies with all methods, procedures, standards and specifications required by the COMPANY in the Manual (defined in Section 3.3 below) or otherwise in writing; and (ii) does not violate any of the other provisions of this Agreement or has cured such violation in the time period provided for herein.
Notwithstanding the foregoing, the COMPANY may (x) establish or license another to establish one or more Special Purpose Outlets (as defined below) within the Protected Territory and (y) sell or otherwise distribute within the Protected Territory products similar to or the same as those offered by the Restaurant through alternative channels of distribution (including without limitation grocery and convenience stores and internet, direct mail and catalog sales); provided, however, that in the event that the Retail Location is a Special Purpose Outlet, the COMPANY will not operate or license another to operate an additional Restaurant in the same building as the Special Purpose Outlet.
A "Special Purpose Outlet" is defined as a Gold Star Chili restaurant located inside shopping malls or centers, zoos, airports, race tracks, amusement parks, fairgrounds, sports stadiums, hospitals, factories, bars, schools, gas stations, and special events.
Nothing herein shall limit the COMPANY's rights or activities outside of the Protected Territory in any respect whatsoever (without limiting the generality of the foregoing, it is expressly agreed that no exclusive, protected or other territorial rights of any kind whatsoever outside of the Protected Territory, including any contiguous market area, is granted or to be inferred to or for FRANCHISEE).
Nothing herein shall limit the COMPANY, its affiliates or any other franchisee or licensee in soliciting or accepting orders from customers anywhere whether within or outside of the Protected Territory.
- 1.4 Additional Stores.
The rights granted FRANCHISEE under this Agreement relate solely to the Retail Location.
Source: Item 23 — Receipts (FDD pages 53–163)
What This Means (2025 FDD)
According to the 2025 Gold Star Franchise Disclosure Document, the franchise rights granted are primarily non-exclusive, with a limited protected territory. Gold Star agrees not to operate or license another restaurant within the franchisee's Protected Territory, which is defined on the cover page of the franchise agreement. This protection is contingent upon the franchisee's full compliance with Gold Star's standards and the franchise agreement terms. However, Gold Star retains the right to establish or license Special Purpose Outlets within the Protected Territory, such as those in shopping malls, zoos, airports, and other specified locations. They can also sell similar products through alternative channels like grocery stores or online.
The rights granted to the franchisee are specifically tied to the Retail Location outlined in the agreement. Gold Star's rights and activities outside the Protected Territory are not limited in any way, and no territorial rights outside the Protected Territory are granted or implied. Furthermore, Gold Star, its affiliates, or other franchisees can solicit orders from customers both within and outside the Protected Territory.
In essence, while a Gold Star franchisee receives a Protected Territory, this protection has limitations. The franchisor can still operate or license other outlets in specific locations and utilize alternative distribution channels within that territory. The franchisee's rights are confined to their specific Retail Location, and the franchisor's activities outside of that territory remain unrestricted. This arrangement allows Gold Star to expand its brand presence through various avenues while providing some level of territorial exclusivity to franchisees, albeit with noted exceptions.