Is the Successors and Assigns clause in the Gold Star franchise agreement subject to any other section?
Gold_Star Franchise · 2025 FDDAnswer from 2025 FDD Document
- 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]."
Source: Item 23 — Receipts (FDD pages 53–163)
What This Means (2025 FDD)
According to the 2025 Gold Star Franchise Disclosure Document, the Successors and Assigns clause is subject to other sections within the agreement. Specifically, Section 13 of the franchise agreement outlines the terms and conditions related to the issuance and transfer of any interest in the franchisee entity. This means that any transfer of ownership or equity in the Gold Star franchise is restricted and governed by the stipulations in Section 13.
For a franchisee, this implies that if the business is set up as a partnership, corporation, or limited liability company, the governing documents must explicitly state that any transfer of interest is restricted by Section 13 of the agreement. Furthermore, upon executing the franchise agreement, the franchisee must provide resolutions from their governing body authorizing the agreement and confirming that no shares or interests will be issued or transferred except as permitted by the agreement. This ensures that Gold Star maintains control over who becomes involved in the franchise and that all parties are aware of the transfer restrictions.
Additionally, if the franchisee is a corporation or LLC, any securities issued must include a legend indicating that their transfer is subject to the terms and conditions of the franchise agreement with Gold Star. This legend serves as a clear warning to potential investors or transferees that the franchise agreement imposes restrictions on ownership transfers. These measures are in place to protect Gold Star's brand and ensure that any new owners or investors meet the franchisor's standards and qualifications.
In the event of death or disability of a person with a controlling interest in the franchise, Section 13 mandates that the executor, administrator, or personal representative must transfer the interest to a Gold Star-approved third party within six months. This transfer is subject to the same conditions as any other transfer. If the heirs or devisees cannot meet the conditions in Section 13.4, the personal representative has a reasonable time to dispose of the decedent's interest, subject to all applicable transfer terms in the agreement. This ensures a smooth transition of ownership while maintaining Gold Star's standards and control over the franchise.