What are the insurance requirements for the collateral that Big O Tires debtors must adhere to?
Big_O_Tires Franchise · 2025 FDDAnswer from 2025 FDD Document
Franchisee shall, at its expense and no later than upon the Commencement Date (or the Effective Date, if later), procure and maintain in full force and effect throughout the term of this Agreement insurance that shall be in such coverages, limits and amounts as may from time to time be required by Big O in the Manual or otherwise and which shall designate Big O and Big O's Affiliates designated by Big O, and their directors, officers, employees, agents and other Big O designees as additional named insured(s).
- 21.02 Proof of Insurance. Prior to the Commencement Date (or the Effective Date, if later), Franchisee shall make timely delivery of a signed original certificate or certificates of all required insurance coverages to Big O, which shall contain the authorized agent's business name, address and phone number, together with a statement by the insurer that the policy will not be canceled or materially changed without at least sixty (60) days prior written notice to Big O that the alteration or cancellation is being made. All insurance coverages will be underwritten by a company acceptable to Big O, with a Best's Rating of no less than "A-" or a financial statement of the insurer approved by Big O. If Franchisee fails to purchase required insurance conforming to the standards prescribed by Big O, Big O may obtain such insurance for Franchisee, and Franchisee shall pay Big O the cost of such insurance plus a ten percent (10%) administrative surcharge. If Big O deems it appropriate, Franchisee shall, upon Big O's request, provide to Big O a true, complete certified copy of all, or a part of the Franchisee's insurance policies within 10 days of receiving such request. The Franchisee shall provide to Big O renewal certificates of insurance, or certified insurance binders, for all required coverages no fewer than 10 days before the indicated anniversary date(s) of such insurance coverages.
Source: Item 23 — RECEIPTS (FDD pages 102–535)
What This Means (2025 FDD)
The 2025 Big O Tires Franchise Disclosure Document outlines insurance requirements for franchisees but does not specifically detail insurance requirements related to collateral for debtors. However, the FDD does state that franchisees must procure and maintain insurance coverage throughout the term of the agreement. These coverages must be in the limits and amounts that Big O Tires requires, and must designate Big O Tires and its affiliates as additional named insureds.
Prior to the commencement date, franchisees must provide signed original certificates of all required insurance coverages to Big O Tires. These certificates must include the authorized agent's business name, address, and phone number, along with a statement from the insurer that the policy will not be canceled or materially changed without at least sixty days prior written notice to Big O Tires. All insurance coverages must be underwritten by a company acceptable to Big O Tires, with a Best's Rating of no less than "A-" or a financial statement of the insurer approved by Big O Tires.
If a franchisee fails to purchase the required insurance that conforms to Big O Tires' standards, Big O Tires has the right to obtain such insurance for the franchisee, and the franchisee will be responsible for the cost of the insurance plus a ten percent administrative surcharge. Big O Tires may also request a true, complete certified copy of all or part of the franchisee's insurance policies, which the franchisee must provide within 10 days of receiving the request. Franchisees must also provide renewal certificates of insurance or certified insurance binders for all required coverages no fewer than 10 days before the anniversary dates of such insurance coverages.
While the FDD details general insurance requirements and procedures, it lacks specific information regarding insurance for collateral related to debt. A prospective Big O Tires franchisee should ask the franchisor for clarification on whether there are additional insurance requirements related to collateral, and if so, what those specific requirements are.