Is transferring membership interest by a Gold Star franchisee considered a transfer?
Gold_Star Franchise · 2025 FDDAnswer from 2025 FDD Document
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.
Source: Item 23 — Receipts (FDD pages 53–163)
What This Means (2025 FDD)
According to Gold Star's 2025 Franchise Disclosure Document, the issuance or transfer of membership interests in a franchisee entity (corporation, LLC, or partnership) is considered a "Transfer" that is subject to certain restrictions and requires compliance with specific conditions outlined in Section 13 of the franchise agreement. This means that if a franchisee wishes to sell or transfer their membership interest, they must adhere to the procedures and obtain approval from Gold Star.
Gold Star places these restrictions to maintain control over who becomes a franchisee and to ensure that all franchisees meet their standards. These standards include financial capacity, business qualifications, and good moral character. The franchise agreement stipulates that the franchisee entity cannot issue additional stock, membership, partnership, or other ownership interests or permit any transfer of such interest without complying with Gold Star's rights as detailed in Section 13. Furthermore, all stockholders, members, or partners must agree in writing not to issue, assign, transfer, pledge, sell, or otherwise convey any capital stock, membership interest, or partnership interest in the franchisee without Gold Star's compliance.
These restrictions are further reinforced by requiring all partnership and operating agreements to contain provisions setting forth these limitations. Additionally, all stock certificates must have a legend endorsed on them, referencing the franchise agreement and the restrictions on transfer. This ensures that any potential transferee is aware of these limitations before acquiring any interest in the Gold Star franchise. Prospective franchisees should carefully review Section 13 of the franchise agreement to fully understand the implications and requirements for transferring ownership interests.