Is a Buildingstars franchisee permitted to grant a security interest in their furniture, fixtures, and equipment?
Buildingstars Franchise · 2025 FDDAnswer from 2025 FDD Document
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's 2025 Franchise Disclosure Document, a franchisee is generally restricted from granting a security interest, pledge, or lien upon their interest in the Franchise Agreement, the business, or its assets. However, there is an exception to this rule.
Specifically, a Buildingstars franchisee is permitted to grant a security interest in their furniture, fixtures, and equipment. This is allowed only to secure the franchisee's obligations to the seller or lender of said furniture, fixtures, and equipment. The security interest must be related to any indebtedness connected to the business.
Additionally, a Buildingstars franchisee is permitted to assign its accounts receivable in connection with any third-party financing of employee payroll. This provides franchisees with some flexibility in managing their business finances and securing necessary funding for specific operational needs.