Is a Buildingstars franchisee allowed to place a lien upon the franchisee's interest in the agreement?
Buildingstars Franchise · 2025 FDDAnswer from 2025 FDD Document
- Q.
Limitation on Liens.
FRANCHISEE shall not grant a security interest, pledge, or place a lien upon FRANCHISEE'S interest in this Agreement or in the Business or in the assets used in the business, except that FRANCHISEE shall be permitted to grant a security interest in such furniture, fixtures, and equipment to secure FRANCHISEE'S obligation to the seller of or lender for such furniture, fixtures, and equipment to secure any indebtedness relating to the business and FRANCHISEE shall be
permitted to assign its accounts receivable in connection with any third party financing of employee payroll.
Source: Item 22 — CONTRACTS (FDD page 43)
What This Means (2025 FDD)
According to Buildingstars' 2025 Franchise Disclosure Document, a franchisee is generally restricted from placing a lien upon their interest in the Franchise Agreement, the business, or the assets used in the business. However, there are specific exceptions to this restriction.
The Buildingstars franchisee is permitted to grant a security interest in furniture, fixtures, and equipment to secure their obligation to the seller or lender of these items. This allows the franchisee to finance necessary business assets. Additionally, a Buildingstars franchisee is allowed to assign its accounts receivable in connection with third-party financing of employee payroll. This provides flexibility in managing cash flow and ensuring employees are paid on time.
These exceptions provide some financial flexibility for the Buildingstars franchisee while generally protecting Buildingstars' interests by preventing the franchisee from broadly encumbering the franchise itself. This limitation helps to ensure the stability and value of the Buildingstars franchise system.