Must a Buildingstars franchisee be in compliance with the Franchise Agreement to transfer the franchise?
Buildingstars Franchise · 2025 FDDAnswer from 2025 FDD Document
- B. By FRANCHISEE. BUILDINGSTARS has the right to reasonably disapprove any person or entity would have actual, legal or effective control over the Business and shall have the right to approve any Transfer. Consent to a Transfer shall not be deemed a waiver of BUILDINGSTARS' right to consent to any subsequent Transfers. BUILDINGSTARS will approve a sale, Transfer or change in ownership under the following conditions:
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- Governmental Compliance. The Transfer is conducted in compliance with applicable laws and regulations and the transferee has all permits and licenses necessary to operate the Business;
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- Prior Compliance. The FRANCHISEE has performed its obligations and duties under this Agreement and FRANCHISEE is not in default under this Agreement, or any other agreement with BUILDINGSTARS;
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Source: Item 22 — CONTRACTS (FDD page 43)
What This Means (2025 FDD)
According to Buildingstars's 2025 Franchise Disclosure Document, a franchisee must be in compliance with the Franchise Agreement to transfer their franchise. Buildingstars will approve a transfer if the franchisee has performed all obligations and duties under the agreement and is not in default. This requirement ensures that the franchise system maintains its integrity and standards, as only franchisees in good standing are permitted to transfer their business to a new owner.
In addition to being in good standing, the franchisee must also meet other conditions for Buildingstars to approve the transfer. These conditions include ensuring the transfer complies with all applicable laws and regulations, satisfying all monetary obligations to Buildingstars and its affiliates, and obtaining a general release of claims against Buildingstars. The prospective transferee must also meet Buildingstars' standards for new franchisees, including demonstrating good moral character, a good credit rating, and sufficient financial resources.
These transfer requirements are typical in franchising, as franchisors want to ensure that new franchisees are well-qualified and that the transfer does not negatively impact the brand. For a prospective Buildingstars franchisee, this means maintaining compliance with the Franchise Agreement is not only essential for the ongoing operation of the business but also for preserving the option to sell or transfer the franchise in the future. Failing to meet these obligations could prevent a franchisee from transferring their business, potentially resulting in financial losses.