Under what circumstances related to the Promissory Note, Franchise Agreement, or their transfer, does this section of the Buildingstars FDD apply?
Buildingstars Franchise · 2025 FDDAnswer from 2025 FDD Document
nt Sales Fee is payable in cash or in the following manner:
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- FRANCHISEE may request new customer accounts in increments of $1,000 of Monthly Contract Revenue. At such time as FRANCHISEE submits said request, FRANCHISEE shall pay BUILDINGSTARS $100 for every $1,000 Monthly Contract Revenue it requested. This will serve as the first monthly payment under the Promissory Note in order to finance the Account Sales Fee. The amount of the Promissory Note will be 200% of the Monthly Contract Revenue. The Promissory Note will be payable without interest in 20 equal monthly installments. For example, if FRANCHISEE requests new customer accounts which would generate $2,000 in Monthly Contract Revenue, it would pay $200 (1/20 of $2,000 x 200%) ("Monthly Payment") and sign a Promissory Note guaranteed by the Guarantors under this Agreement which will contain substantially the same terms and conditions as set forth in Exhibit II. The second monthly payment will be due after the first full month FRANCHISEE has provided service to said new customer account. BUILDINGSTARS may withhold the monthly Promissory Note payments from the amount of billings BUILDINGSTARS collects for the FRANCHISEE, as more fully described in Sec. VI.D. below. A default under the Promissory Note shall also be deemed a default under this Agreement.
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- BUILDINGSTARS may, but is not required to, offer FRANCHISEE new customer accounts. If FRANCHISEE decides to accept the new customer account, which decision is solely within the FRANCHISEE'S discretion, FRANCHISEE must either pay the Account Sales Fee in cash or execute a Promissory Note guaranteed by the Guarantors under this Agreement substantially in the form set forth in Exhibit II for the amount of the Account Sales Fee. The Promissory Note is payable without interest in twenty (20) monthly installments, with the first installment due after the first full month FRANCHISEE has provided service to said new customer account. BUILDINGSTARS may withhold the monthly Promissory Note payments from the amount of billings BUILDINGSTARS collects for the FRANCHISEE, as more fully described in Se
Source: Item 22 — CONTRACTS (FDD page 43)
What This Means (2025 FDD)
According to Buildingstars's 2025 Franchise Disclosure Document, the section regarding the Promissory Note applies when a franchisee accepts new customer accounts offered by Buildingstars and chooses to finance the Account Sales Fee rather than paying it in cash. The Promissory Note is guaranteed by guarantors and contains terms and conditions similar to those in Exhibit II of the Franchise Agreement. A franchisee may also be required to continue payments on the outstanding Account Sales Fee per the Promissory Note, even if a customer ceases business or moves outside the territory.
Specifically, the franchisee will sign a Promissory Note for the amount of the Account Sales Fee if they decide to finance it. For instance, if a franchisee requests new customer accounts that would generate $2,000 in Monthly Contract Revenue, they would pay $200 upfront (1/20 of $2,000 x 200%) and sign a Promissory Note for the remaining amount. This note is payable without interest in 20 equal monthly installments, with the first payment due after the first full month of service to the new customer. Buildingstars can withhold these monthly payments from the billings it collects on behalf of the franchisee.
Furthermore, a default on the Promissory Note is considered a default under the Franchise Agreement. In the event of a transfer of interest, the transferor must satisfy all monetary obligations to Buildingstars, its affiliates, and suppliers, which would include any outstanding balance on the Promissory Note. The Promissory Note also requires a guarantee, where the guarantor ensures the franchisee's obligations under the note, induced by Buildingstars deferring payment of fees. This guarantee is enforceable immediately without Buildingstars needing to pursue other remedies against the franchisee.