Does a bankruptcy proceeding involving the Buildingstars Franchisee affect the Guarantor's obligations under the Promissory Note Guarantee?
Buildingstars Franchise · 2025 FDDAnswer from 2025 FDD Document
The validity of this Guarantee and the obligations of GUARANTOR hereunder shall in no manner be terminated, affected, or impaired by reason of the assertion or the failure to assert by FRANCHISOR against FRANCHISEE, any of the rights or remedies reserved to FRANCHISOR pursuant to the provisions of the Promissory Note.
This Guarantee shall be absolute, unconditional and irrevocable.
This Guarantee shall be a continuing Guarantee, and (whether or not GUARANTOR shall have notice or knowledge of any of the following), the liability and obligations of GUARANTOR hereunder shall be absolute and unconditional irrespective of:
- (a) any modification of, or supplement to, or extension or renewal of the Promissory Note, the Franchise Agreement, or any assignment, sale, or transfer thereof;
- (b) any exercise or non-exercise of any right, power, remedy or privilege under or in respect of the Promissory Note or this Guarantee or any waiver, consent or approval by FRANCHISOR with respect to any of the covenants, terms, conditions or agreements contained in the Promissory Note or any indulgences, forbearance or extensions of time for performance or observance allowed to FRANCHISEE from time to time, at any time and for any length of time;
- (c) any bankruptcy, insolvency, reorganization, arrangement, readjustment, composition or liquidation or similar proceedings relating to FRANCHISEE, or its properties or creditors;
- (d) any impairment, modification, change, release or limitation of liability or obligation of FRANCHISEE under the Promissory Note (including, but not limited to, any disaffirmation or abandonment by a trustee of FRANCHISEE), resulting from the operation of any present or future provision of the Bankruptcy Abuse Prevention and Consumer Protection Reform Act of 2005 or any other similar federal or state statute, or from the decisions of any court; or
Source: Item 23 — RECEIPT (FDD pages 43–217)
What This Means (2025 FDD)
According to Buildingstars's 2025 Franchise Disclosure Document, a franchisee's bankruptcy does not terminate, affect, or impair the obligations of the guarantor under the Promissory Note Guarantee. The guarantor's obligations remain absolute and unconditional, irrespective of any bankruptcy, insolvency, reorganization, or similar proceedings relating to the franchisee, its properties, or creditors. This means that even if the franchisee declares bankruptcy, the guarantor is still responsible for fulfilling the obligations outlined in the Promissory Note Guarantee.
This protection extends to any impairment, modification, change, release, or limitation of liability of the franchisee under the Promissory Note, including any disaffirmation or abandonment by a trustee of the franchisee resulting from bankruptcy laws. Buildingstars ensures that the guarantor's obligations are not diminished due to legal proceedings affecting the franchisee's financial status.
For a prospective Buildingstars franchisee, this implies that if a third party guarantees the franchisee's financial obligations via a Promissory Note Guarantee, that guarantor remains fully liable even if the franchisee encounters severe financial difficulties leading to bankruptcy. This clause provides Buildingstars with a higher degree of financial security, as they can still pursue the guarantor for any outstanding debts, regardless of the franchisee's bankruptcy status. Franchisees should ensure that any potential guarantors are fully aware of this obligation and its implications before entering into the agreement.