Under what circumstances does Gold Star have the option to purchase the Retail Location from the franchisee?
Gold_Star Franchise · 2025 FDDAnswer from 2025 FDD Document
- 15.2 Company Purchase Option.
Upon termination or expiration of this Agreement, or upon the permanent closing or abandonment of the Restaurant, the COMPANY shall have the option of purchasing the Retail Location and any or all of the furnishings and equipment used in connection therewith (including, if FRANCHISEE owns the Retail Location, the real estate underlying the Retail Location), as the COMPANY may elect, from FRANCHISEE.
If the COMPANY elects to exercise this option, the COMPANY shall give written notice of its desire to exercise the option to FRANCHISEE within thirty (30) days after such termination, expiration or closing, specifying whether the COMPANY will purchase the real property, on the one hand, and the furnishings and equipment, on the other, or both.
The purchase price to be paid by the COMPANY to FRANCHISEE for any real property shall be determined by either (i) agreement in writing between the COMPANY and FRANCHISEE or (ii) by two independent appraisers, one appointed by the COMPANY and one appointed by FRANCHISEE.
If the purchase price of the real property is determined by appraisal, the appraisers shall exclude from the determination any value with respect to: (x) any trademark, service mark or other commercial symbol used in connection with the operation of the Store, and (y) any goodwill or "going concern" value.
If the purchase price of the real property is determined by appraisal, the two appraisals will be averaged to determine the purchase price; provided, however, that if the two appraisals differ by more than 10%, then, unless the COMPANY and FRANCHISEE agree in writing to a purchase price within 30 days after receipt of the second appraisal, the two appraisers will select a mutually agreeable third appraiser who will solely determine the purchase price.
The purchase price to be paid by the COMPANY to FRANCHISEE for any furnishing and equipment shall be the book value of such furnishings and equipment.
The COMPANY will have 30 days from the date the purchase price (with respect to both the real property and the furnishings and equipment, as applicable, if the COMPANY is purchasing both) is determined to elect to purchase either the real estate or the furnishings and equipment, or both.
Source: Item 23 — Receipts (FDD pages 53–163)
What This Means (2025 FDD)
According to Gold Star's 2025 Franchise Disclosure Document, Gold Star has the option to purchase the retail location from the franchisee under specific circumstances. These circumstances include the termination or expiration of the Franchise Agreement, or if the franchisee permanently closes or abandons the restaurant. This provision applies whether the franchisee owns the real estate underlying the retail location or not.
If Gold Star decides to exercise this purchase option, it must provide written notice to the franchisee within 30 days after the termination, expiration, or closing of the restaurant. The notice must specify whether Gold Star intends to purchase the real property, the furnishings and equipment, or both. The purchase price for the real property will be determined either through a written agreement between Gold Star and the franchisee or by two independent appraisers, one appointed by each party. The appraisal excludes any value associated with trademarks, service marks, or goodwill.
If the purchase price is determined by appraisal, the two appraisals will be averaged. However, if the appraisals differ by more than 10%, a third mutually agreeable appraiser will determine the final purchase price, unless Gold Star and the franchisee agree on a price within 30 days of receiving the second appraisal. The purchase price for furnishings and equipment will be the book value of such items. Gold Star has 30 days from the date the purchase price is determined to decide whether to purchase the real estate, the furnishings and equipment, or both.
This clause is important for prospective franchisees to understand, as it outlines the conditions under which Gold Star can buy the retail location. It also details the process for determining the purchase price, which includes appraisal methods and considerations for excluding certain values like goodwill. Franchisees should be aware of these terms, especially when considering the potential sale or closure of their Gold Star franchise.