Can Buildingstars require the franchisee and guarantors to remain liable for the obligations of the assignee after a transfer?

According to Buildingstars's 2025 Franchise Disclosure Document, Buildingstars retains the discretion to require the franchisee and any guarantors to remain liable for the obligations of the assignee, even after the franchise is transferred. This means that even after a franchisee sells their Buildingstars franchise, Buildingstars can still hold the original franchisee and their guarantors responsible if the new franchisee (the assignee) fails to meet the obligations outlined in the franchise agreement.

This clause serves as a protection for Buildingstars, ensuring the continued performance of the franchise even after ownership changes. For a prospective franchisee, this represents a significant risk. If the assignee does not perform well or defaults on their obligations, the original franchisee and their guarantors could be held financially responsible, potentially impacting their personal assets and credit.

It is important for a potential Buildingstars franchisee to carefully consider this continuing liability clause and to fully understand the financial implications before signing the franchise agreement. They should also thoroughly vet any potential buyers if they plan to sell the franchise in the future, as the original franchisee remains at risk if the new franchisee fails to perform. This is not uncommon in franchising, as franchisors often seek to ensure the stability and performance of their brand, but the extent of liability can vary.

Before investing, prospective franchisees should seek legal counsel to fully understand the implications of this clause and negotiate terms if possible. Understanding the conditions under which Buildingstars might enforce this clause is crucial for mitigating potential future liabilities.