Can Buildingstars require the franchisee and guarantors to remain liable after an assignment?

According to Buildingstars's 2025 Franchise Disclosure Document, Buildingstars has the discretion to require the franchisee and any guarantors to remain liable for the obligations of the assignee if Buildingstars approves an assignment. This means that even after a franchisee sells their Buildingstars franchise, they (and their guarantors) could still be responsible if the new owner fails to meet the franchise obligations.

This clause has significant implications for a franchisee looking to sell their business. Even with an approved transfer, the original franchisee isn't necessarily released from the agreement. Buildingstars could pursue the original franchisee or their guarantors for any shortcomings of the new franchisee. This could include unpaid royalties, failure to maintain standards, or any other breach of the franchise agreement.

Franchisees should carefully consider this continuing liability when planning their exit strategy. It may be prudent to negotiate the terms of the assignment with Buildingstars to seek a release of liability as part of the transfer agreement. Alternatively, franchisees may want to get assurances from the assignee and potentially require a personal guarantee from the new franchisee to protect themselves from future liabilities. It is important to consult with a legal professional to fully understand the risks and potential mitigation strategies associated with this clause.