What insurance requirements must Benjamin Franklin Plumbing meet to preserve the Collateral?
Benjamin_Franklin_Plumbing Franchise · 2025 FDDAnswer from 2025 FDD Document
Debtor agrees that it: (a) will properly maintain, repair and preserve the Collateral and insure the same against casualty loss by a policy of insurance covering such risks and in such amount as the Secured Party may require, with loss payable to Secured Party and will furnish certificates acceptable to Secured Party; (b) will pay in timely fashion all taxes which may become a lien on the Collateral; (c) except with Secured Party's prior written consent, Debtor will make no sale, contract to sell, lease, encumbrance or other disposition of the Collateral nor change its physical location from the Premises above designated; (d) will use the Collateral lawfully and only within insurance coverage and not use the Collateral so as to cause or result in any waste, unreasonable deterioration or depreciation; (e) will permit Secured Party to enter on Debtor's property and to inspect the Collateral at any reasonable time; (f) will not, with the exception of sales of inventory in the ordinary course of business, remove the Collateral from the Premises without the consent of Secured Party except when reasonably necessary for repair or to replace obsolete or worn out items of Collateral; and (g) will execute any additional agreements, assignments or documents that may be deemed necessary or advisable by Secured Party to effectuate the purpose of this Agreement and the protection of the Collateral.
Source: Item 22 — CONTRACTS (FDD pages 87–88)
What This Means (2025 FDD)
According to Benjamin Franklin Plumbing's 2025 Franchise Disclosure Document, as a debtor, the franchisee must adhere to specific insurance requirements to protect the collateral. The franchisee is required to insure the collateral against casualty loss by securing an insurance policy that covers such risks. The amount of insurance coverage must be as required by the Secured Party, which is Benjamin Franklin Franchising SPE LLC.
Furthermore, the insurance policy must include a loss payable clause that favors the Secured Party, ensuring that in the event of a loss, the insurance proceeds are directed to Benjamin Franklin Franchising SPE LLC. The franchisee must also furnish certificates of insurance that are acceptable to the Secured Party, providing proof of coverage and compliance with the insurance requirements.
In addition to maintaining insurance, the franchisee is responsible for properly maintaining, repairing, and preserving the collateral. They must also ensure that all taxes that could become a lien on the collateral are paid in a timely manner. These measures collectively aim to protect the value and integrity of the collateral, benefiting both the franchisee and Benjamin Franklin Franchising SPE LLC by mitigating potential losses and maintaining the asset's worth.