What happens if a Baya Bar franchisee does not obtain the required insurance?
Baya_Bar Franchise · 2024 FDDAnswer from 2024 FDD Document
If you do not obtain any insurance as required, we have the right (but not the obligation) to purchase insurance on your behalf and you must reimburse our costs related to this purchase plus a 10% administrative fee.
When you sign the lease for the Shop premises or 90 days after you sign the Franchise Agreement, whichever occurs first, you must obtain the insurance coverage for the Shop that is required by the terms of your lease and applicable law, and that we specify in the Manual or otherwise in writing. Your insurance coverage must be maintained during the term of the Franchise Agreement and must be obtained from a responsible, duly licensed carrier or carriers acceptable to us and having a rating of at least "A-VII" with A.M. Best Company. All insurance must be on an "occurrence" basis. Currently you must maintain the following insurance: (1) "Special" causes of loss coverage forms, including fire and extended coverage, crime, vandalism, and malicious mischief, on all property of the Franchised Business, for full repair and replacement value (subject to a reasonable deductible); (2) Business interruption insurance covering at least 12 months of income; (3) Commercial General Liability insurance, including products liability coverage, and broad form commercial liability coverage, written on an "occurrence" policy form in an amount of not less than $1,000,000 single limit per occurrence and $2,000,000 aggregate limit; (4) Business Automobile Liability insurance including owned, leased, non-owned and hired automobiles coverage in an amount of not less than $1,000,000; (5) Workers Compensation coverage as required by state law; and (6) any insurance required by the terms of your lease, required by law or that we may require in the future.
All insurance policies, except for workers' compensation, must name us, our affiliates and the officers, directors, shareholders, partners, agents, representatives, independent contractors, servants and employees of each of them, as additional named insureds. All insurance policies must include a waiver of subrogation in favor of us and our affiliates, must be primary and non-contributing with any insurance carried by us or our affiliates, and must stipulate that we receive no less than 30 days' prior written notice
Source: Item 8 — RESTRICTIONS ON SOURCES OF PRODUCTS AND SERVICES (FDD pages 20–24)
What This Means (2024 FDD)
According to Baya Bar's 2024 Franchise Disclosure Document, if a franchisee fails to obtain the required insurance, Baya Bar has the right, but not the obligation, to purchase insurance on the franchisee's behalf. The franchisee is then responsible for reimbursing Baya Bar for the cost of the insurance, in addition to a 10% administrative fee.
Baya Bar requires franchisees to obtain insurance coverage for the shop as specified in the lease terms, applicable law, and the Baya Bar manual or other written communication. This insurance must be secured when the franchisee signs the lease for the shop premises or 90 days after signing the Franchise Agreement, whichever comes first. The insurance must be maintained throughout the term of the Franchise Agreement with a duly licensed carrier acceptable to Baya Bar, having a rating of at least "A-VII" with A.M. Best Company, and must be on an "occurrence" basis.
The required insurance includes: (1) "Special" causes of loss coverage forms; (2) Business interruption insurance covering at least 12 months of income; (3) Commercial General Liability insurance of not less than $1,000,000 single limit per occurrence and $2,000,000 aggregate limit; (4) Business Automobile Liability insurance of not less than $1,000,000; (5) Workers Compensation coverage as required by state law; and (6) any insurance required by the lease or by law, or that Baya Bar may require in the future. All policies, except workers' compensation, must name Baya Bar and its affiliates as additional insureds and include a waiver of subrogation in favor of Baya Bar. Baya Bar must receive at least 30 days' prior written notice of any material alteration or cancellation of the policies.
This requirement ensures that Baya Bar franchisees are protected against potential liabilities and losses, while also safeguarding the interests of the Baya Bar brand. The franchisor's ability to purchase insurance on behalf of a non-compliant franchisee provides a safety net, although the franchisee ultimately bears the financial burden, including an additional administrative fee. Franchisees should ensure they understand and meet all insurance requirements to avoid these additional costs and potential breaches of the franchise agreement.