Can Buildingstars withhold consent to a transfer if the purchase price is not economically feasible to the proposed assignee?
Buildingstars Franchise · 2025 FDDAnswer from 2025 FDD Document
Although BUILDINGSTARS will not be required to determine the value of business upon a Transfer, if in BUILDINGSTARS' reasonable judgment, the purchase price or terms of the sale are not economically feasible to the proposed assignee, BUILDINGSTARS can withhold its consent to such an assignment or Transfer.
Further, BUILDINGSTARS may, in good faith, notify FRANCHISEE, stating the reasons that BUILDINGSTARS has elected to withhold approval of the proposed Transfer.
Notwithstanding the foregoing, BUILDINGSTARS' approval of the Transfer shall not be deemed to imply or warrant that the purchase price or terms of sale are economically feasible, and BUILDINGSTARS hereby disclaims any responsibility for making any such determination.
Source: Item 22 — CONTRACTS (FDD page 43)
What This Means (2025 FDD)
According to Buildingstars' 2025 Franchise Disclosure Document, Buildingstars has the right to withhold consent to a franchise transfer if they reasonably judge that the purchase price or terms of the sale are not economically feasible for the proposed buyer. However, Buildingstars is not required to determine the value of the business during a transfer. If Buildingstars decides to withhold approval, they may notify the franchisee, explaining their reasons for doing so.
This clause protects both Buildingstars and the potential franchisee. It prevents a transfer that could lead to financial hardship for the new owner, which could ultimately reflect poorly on the Buildingstars brand. However, the FDD explicitly states that Buildingstars' approval of a transfer does not imply any warranty or guarantee that the purchase price or terms are economically sound. The responsibility for making that determination ultimately rests with the parties involved in the transfer.
It is important to note that Buildingstars is not obligated to determine the value of the business during a transfer. This means that the franchisee and the potential buyer must conduct their own due diligence to ensure that the terms of the sale are reasonable and sustainable. Prospective franchisees should seek independent financial advice to evaluate the economic feasibility of any proposed transfer.