Are there any exceptions to the non-compete agreement for Gold Star franchisees?
Gold_Star Franchise · 2025 FDDAnswer from 2025 FDD Document
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.
Source: Item 23 — Receipts (FDD pages 53–163)
What This Means (2025 FDD)
According to Gold Star's 2025 Franchise Disclosure Document, while the franchise agreement grants franchisees a protected territory, this protection is subject to certain exceptions. Gold Star retains the right to establish or license others to establish "Special Purpose Outlets" within the franchisee's protected territory. These Special Purpose Outlets can include Gold Star Chili restaurants located inside shopping malls or centers, zoos, airports, race tracks, amusement parks, fairgrounds, sports stadiums, hospitals, factories, bars, schools, gas stations, and special events.
Additionally, Gold Star is not restricted from selling or distributing products similar to or the same as those offered by the Restaurant through alternative channels of distribution within the protected territory. These alternative channels include grocery and convenience stores, internet sales, direct mail, and catalog sales. However, if a Retail Location is a Special Purpose Outlet, Gold Star will not operate or license another to operate an additional Restaurant in the same building as the Special Purpose Outlet.
These exceptions mean that while a franchisee has a protected territory, Gold Star can still operate or license other outlets in certain locations and sell products through other distribution channels within that territory. This could potentially impact the franchisee's sales and market share. Franchisees should carefully consider these exceptions and their potential impact on their business when evaluating the franchise opportunity.