Can Gold Star sell or assign the franchise agreement to a third party?
Gold_Star Franchise · 2025 FDDAnswer from 2025 FDD Document
he transferee will enter into a written assumption, in a form satisfactory to the COMPANY, assuming and agreeing to discharge all of
- FRANCHISEE's obligations under this Agreement prior to and after the date of assumption;
- 13.4.5 The transferee shall have paid the COMPANY its then-current transfer fee. The amount of the transfer fee shall be set by the COMPANY from time to time in the exercise of its absolute discretion. The transfer fee as of the date of this Agreement, but subject to change, is Three Thousand Five Hundred Dollars ($3,500.00).
- 13.4.6 The transferee shall have executed the COMPANY's then-current form of franchise agreement for a term equal to the remaining current term of this Agreement, save and except that there shall be no initial franchise fee payable, and the transferee shall execute such other agreements and documents as the COMPANY may reasonably require.
- 13.5 Exceptions to Transfer Restrictions. Notwithstanding the foregoing, FRANCHISEE (if FRANCHISEE is an individual) may Transfer all of its interest in the Restricted Assets to an entity formed solely for the convenience of ownership without the COMPANY's consent, upon FRANCHISEE's written notice to the COMPANY and compliance with the following requirements:
- 13.5.1 FRANCHISEE will be newly organized and its articles of incorporation or organization, bylaws, partnership agreement, or operating agreement will provide that its activities are confined exclusively to operating the Business;
- 13.5.2 Franchisee's name will not consist of or contain the words "Gold Star Chili", or any colorable variation thereof, or any other mark in which the COMPANY has or claims a proprietary interest; and
- 13.5.3 FRANCHISEE and its Principals will comply with all of the requirements set forth in Section 17 below.
- 13.6 No Transfer by Operation of Law. No person or entity shall succeed to any of the rights of FRANCHISEE under this Agreement by virtue of any voluntary or involuntary proceeding in bankruptcy, receivership, attachment, execution, assignment for the benefit of creditors or other legal process. Any such attempt to so transfer FRANCHISEE's interest in this Agreement shall be null and void.
- 13.7 Prohibition on Issuing Equity. If FRANCHISEE or any proposed transferee is a corporation, limited liability company or partnership, such entity shall not issue any additional stock, membership, partnership or other ownership interests or permit any transfer of any such interest, and each stockholder, member or partner thereof shall, in writing, agree not to issue, assign, transfer, pledge, sell or otherwise convey all or part of any capital stock, membership interest or partnership interest in FRANCHISEE or such transferee, without compliance with the rights of the COMPANY set forth under this Section 13. For the purpose of clarity, any such issuance or transfer will be considered a "Transfer" pursuant to
- this Section 13. All partnership agreements and operating agreements shall contain provisions setting forth the foregoing restrictions. All stock certificates shall have endorsed on them the legend set forth in Section 17.4, below.
- 13.8 Death or Disability of Person with Controlling Interest. Upon the death or permanent incapacity of any person with a direct or indirect controlling interest in this franchise or in FRANCHISEE, and upon the dissolution of a FRANCHISEE that is a partnership, limited liability company, or corporation, or the death or permanent incapacity of a FRANCHISEE that is a natural person, the executor, administrator, personal representative or trustee of such person or entity shall transfer his or its interest to a third party approved by the COMPANY within six (6) months. Such Transfer, including, without limitation, transfers by devise or inheritance, shall be subject to the same conditions of this Section 13 as an intervivos Transfer. However, in the case of Transfer by devise or inheritance, if the heirs or devisees of any such person are unable to meet the conditions in Section 13.4, the personal representative of the deceased FRANCHISEE shall have a reasonable time to dispose of the decedent's interest in the franchise, which disposition shall be subject to all applicable terms and conditions for transfers contained in this Agreement.
- 13.9 Death or Disability of Manager.
Source: Item 23 — Receipts (FDD pages 53–163)
What This Means (2025 FDD)
According to Gold Star's 2025 Franchise Disclosure Document, the franchise agreement can be transferred under certain conditions. Specifically, upon the death or permanent incapacity of a person with a controlling interest in the franchise, the executor, administrator, personal representative, or trustee must transfer the interest to a third party approved by Gold Star within six months. This transfer is subject to the same conditions as any other transfer made during the franchisee's lifetime. If the heirs or devisees cannot meet the standard transfer conditions, the personal representative has a reasonable time to dispose of the decedent's interest, again subject to the standard transfer terms in the agreement.
Gold Star also outlines specific transfer restrictions. If the franchisee is a corporation, limited liability company, or partnership, they cannot issue additional stock, membership, partnership, or other ownership interests, nor can they permit any transfer of such interests without complying with Gold Star's rights as outlined in Section 13 of the franchise agreement. Any issuance or transfer of equity will be considered a "Transfer" under this section. All partnership and operating agreements must contain provisions reflecting these restrictions, and stock certificates must bear a specific legend indicating the transfer restrictions.
There is an exception to these transfer restrictions: a franchisee who is an individual may transfer their interest in the franchise to an entity formed solely for ownership convenience without Gold Star's consent, provided they give written notice and meet certain requirements. These requirements include that the new entity's activities are limited to operating the Gold Star business, its name does not include "Gold Star Chili" or any similar mark, and the franchisee and its principals comply with Section 17 of the franchise agreement.
Gold Star also specifies that no person or entity can succeed to the franchisee's rights through bankruptcy, receivership, attachment, execution, assignment for the benefit of creditors, or other legal processes. Any attempt to transfer the franchisee's interest in this way will be considered void. Furthermore, Gold Star requires a transfer fee, the amount of which it sets at its discretion. As of the date of the Franchise Agreement, the transfer fee is $3,500, but this is subject to change. The transferee must also execute Gold Star's current franchise agreement form for the remaining term of the original agreement, although no initial franchise fee is payable.