When must a Buona franchisee obtain Business Interruption Insurance?
Buona Franchise · 2025 FDDAnswer from 2025 FDD Document
- (h) Business Interruption Insurance, covering Franchisee's loss of revenues and ongoing expenses and to cover any amounts due and owing to Franchisor under this Agreement, including but not limited to the royalties, Marketing Fund contributions, and technology fees that would have been made by Franchisee had the business interruption not occurred, based upon the average of receipts of the Franchised Business for the trailing twelve months prior to the interruption, in an amount not less than the actual loss resulting from an interruption of business for a minimum of twelve (12) months; to be obtained prior to the opening of the Franchised Business;
Source: Item 22 — CONTRACTS (FDD page 78)
What This Means (2025 FDD)
According to Buona's 2025 Franchise Disclosure Document, a franchisee must obtain Business Interruption Insurance prior to the opening of their franchised business. This insurance coverage is designed to protect the franchisee from losses in revenue and to cover ongoing expenses, including royalties, marketing fund contributions, and technology fees owed to Buona, in the event of a business interruption. The coverage amount should be based on the average receipts of the franchised business for the twelve months leading up to the interruption and must cover the actual loss resulting from the interruption for a minimum of twelve months.
This requirement ensures that Buona franchisees have a financial safety net in place to manage unforeseen circumstances that could disrupt their business operations. By securing Business Interruption Insurance before opening, franchisees can mitigate potential financial risks associated with unexpected events such as natural disasters, property damage, or other incidents that could temporarily halt business activities. This proactive approach helps franchisees maintain financial stability and meet their obligations to Buona even during challenging times.
The specific terms of the Business Interruption Insurance, including the coverage amount and duration, are crucial for franchisees to understand. It is important to assess the potential risks in their specific location and ensure that the insurance policy adequately covers those risks. Franchisees should also confirm that the insurance policy meets Buona's requirements, including the minimum coverage period and the inclusion of royalties, marketing fund contributions, and technology fees in the coverage. This ensures that both the franchisee and Buona are protected in the event of a business interruption.
In addition to Business Interruption Insurance, Buona franchisees are required to obtain other types of insurance, such as Cyber Insurance and PCI DSS Liability coverage, prior to specific milestones like computer system installation and business opening, respectively. These insurance requirements collectively aim to protect the franchisee and Buona from a range of potential risks, ensuring the stability and continuity of the franchised business. Franchisees should carefully review all insurance requirements outlined in the Franchise Agreement and consult with insurance professionals to secure appropriate coverage.