What happens if an Alloy franchisee fails to maintain required insurance?

According to Alloy's 2025 Franchise Disclosure Document, franchisees are required to maintain specific insurance coverage. This includes various liability insurances, property insurance, worker's compensation, and other coverage mandated by law or agreements related to the facility. The insurance policies must adhere to Alloy's standards and specifications, including minimum coverage amounts, and must cover both the franchisee and Alloy, its affiliates, and any other designated persons. Franchisees must provide Alloy with certificates of insurance at commencement, annually, or upon request, ensuring Alloy is listed as an additional insured and receives 30 days' notice of any policy changes or cancellations.

If an Alloy franchisee fails to maintain the required insurance coverage, Alloy has the right, but not the obligation, to procure the necessary insurance and charge the franchisee for the costs, along with a reasonable fee for expenses incurred. The franchisee is then obligated to pay these amounts immediately upon written notice from Alloy.

This provision protects Alloy from potential liabilities and ensures that the franchised business operates with adequate financial safeguards. For a prospective franchisee, this means understanding the specific insurance requirements, securing appropriate coverage, and maintaining it throughout the franchise term. Failure to do so can result in Alloy stepping in to secure coverage at the franchisee's expense, adding an unexpected financial burden. This is a fairly standard clause in franchise agreements, as franchisors need to protect their brand and system from potential liabilities arising from franchisee operations.