If Browns Chicken obtains insurance for a franchisee, through what plan can they withdraw the costs?
Browns_Chicken Franchise · 2025 FDDAnswer from 2025 FDD Document
standards of liability, higher damage awards or other relevant changes in circumstances. Each insurance policy shall name Brown as an additional insured on a primary basis, and shall provide for ten (10) days prior written notice to Brown of any material modification, cancellation or expiration of such policy.
Prior to the expiration of the term of each insurance policy, Franchisee shall furnish Brown with a certificate of insurance evidencing the continuation of coverage under a similar policy for an immediately following term, and upon Brown's request, a copy of each such policy. If Franchisee fails or refuses to maintain required insurance coverage or to furnish satisfactory evidence thereof and the payment of the premiums therefor, Brown, at its option and in addition to its other rights and remedies hereunder, may obtain such insurance coverage on behalf of Franchisee and Franchisee shall fully cooperate with Brown in its effort to obtain such insurance policies, promptly execute all forms or instruments required to obtain or maintain any such insurance, allow any inspections of the Store which are required to obtain or maintain such insurance and pay to Brown, on demand, any costs and premiums incurred by Brown.
Source: Item 22 — Contracts (FDD page 43)
What This Means (2025 FDD)
According to Browns Chicken's 2025 Franchise Disclosure Document, if a franchisee fails to maintain the required insurance coverage, Browns Chicken has the option to obtain the necessary insurance on the franchisee's behalf. In such instances, the franchisee is expected to cooperate fully with Browns Chicken in securing the insurance policies, including executing required forms, allowing store inspections, and paying the associated costs and premiums.
Browns Chicken can then withdraw the monthly insurance costs, along with an additional ten percent administration fee, directly from the franchisee's bank account. This withdrawal is facilitated through the franchisee's Bank Draft Plan, which is established as per Paragraph 19.F of the franchise agreement.
This arrangement ensures that Browns Chicken franchisees maintain continuous insurance coverage, protecting both the franchisee and the brand from potential liabilities. The 10% administration fee covers Browns Chicken's expenses for managing the insurance procurement process. The Bank Draft Plan provides a convenient mechanism for Browns Chicken to recover these costs, ensuring timely payment and minimizing administrative burdens.