If a Bhc franchisee fails to procure and maintain the required insurance coverage, what action can the franchisor take?
Bhc Franchise · 2025 FDDAnswer from 2025 FDD Document
- (g) Franchisee's failure, for any reason, to procure and maintain the insurance coverage required under this Agreement, will be deemed a material breach of this Agreement.
- (h) Franchisee must be fully covered in all areas of operating a business. If Franchisee does not procure and maintain the required insurance coverage Franchisor may, but are not required to, procure insurance coverage on Franchisee's behalf and to charge the costs to Franchisee together with a reasonable fee for the expenses Franchisor incurs.
Source: Item 23 — Receipts (FDD pages 52–230)
What This Means (2025 FDD)
According to Bhc's 2025 Franchise Disclosure Document, if a franchisee fails to maintain the required insurance coverage, it will be considered a material breach of the agreement. In such a case, Bhc has the option, but not the obligation, to procure the necessary insurance coverage on behalf of the franchisee. If Bhc chooses to do so, the franchisee will be responsible for covering the costs of the insurance, along with a reasonable fee to compensate Bhc for the expenses incurred in obtaining the coverage.
This clause in the franchise agreement protects Bhc from potential liabilities and ensures that all franchisees operate with adequate insurance, maintaining the brand's reputation and minimizing risks. It is common practice in franchising to require franchisees to maintain specific insurance coverage levels and to allow the franchisor to step in and secure coverage if the franchisee fails to do so.
For a prospective Bhc franchisee, this means that maintaining the required insurance is not just a recommendation but a strict contractual obligation. Failure to comply can lead to Bhc securing the insurance themselves and passing the costs, along with additional fees, onto the franchisee. Therefore, it is crucial for franchisees to understand and adhere to the insurance requirements outlined in the franchise agreement and operations manual to avoid potential financial burdens and maintain compliance with the franchise terms.