Under what circumstances can a Gold Star franchisee cease operating the business without it being considered a default?
Gold_Star Franchise · 2025 FDDAnswer from 2025 FDD Document
- 14.4.4 Without the prior written consent of the COMPANY, FRANCHISEE ceases to operate the Business for more than 24-hour period if required to be operating during that time in the Manual or abandons the Business or the Store or, upon destruction of the Retail Location, fails to rebuild it and resume operation with a reasonable time.
However, cessation of the Business shall not constitute default of this Agreement if caused by condemnation, appropriation, expiration of the term of the Lease (except when due to FRANCHISEE's fault or neglect), or when rebuilding following destruction of the buildings at the Retail Location is prohibited by law or the Lease so long as FRANCHISEE is actively seeking a new location pursuant to Section 1.5, above, and is otherwise in compliance with this Agreement;
Source: Item 23 — Receipts (FDD pages 53–163)
What This Means (2025 FDD)
According to Gold Star's 2025 Franchise Disclosure Document, a franchisee's cessation of business operations typically constitutes a default of the Franchise Agreement. However, there are specific exceptions where a franchisee can cease operations without being in default.
The cessation of business will not be considered a default if it is caused by certain external factors. These include condemnation of the property, appropriation of the property, or the expiration of the lease term, provided the lease expiration is not due to the franchisee's fault or neglect. Additionally, if the retail location is destroyed and rebuilding is prohibited by law or the lease, the franchisee will not be in default as long as they are actively seeking a new location and are otherwise in compliance with the Franchise Agreement.
In practical terms, this means that Gold Star franchisees are protected from being penalized if they have to temporarily or permanently close their restaurant due to circumstances beyond their control, such as government action, natural disasters, or legal restrictions on rebuilding. However, it is crucial that the franchisee diligently pursues a new location if rebuilding is not possible and adheres to all other terms of the Franchise Agreement to maintain their good standing with Gold Star.