When must a Carls franchisee submit evidence of satisfactory insurance and proof of payment to CJR?
Carls Franchise · 2024 FDDAnswer from 2024 FDD Document
With respect to the Commercial Property coverage, CJR and its affiliates shall be named as Loss Payee.
- D. All required insurance policies shall be in full force and effect and Franchisee shall submit to CJR evidence of satisfactory insurance and proof of payment therefore no later than the date the first of the following occurs: (1) 30 days prior to the scheduled opening date of the Franchised Restaurant; (2) the date Franchisee takes possession of the Franchised Location, or (3) the date construction commences at the Franchised Location, if Franchisee is contractually obligated for the construction.
On each policy renewal date thereafter, Franchisee shall again submit evidence of satisfactory insurance and proof of payment therefor to CJR.
The evidence of insurance shall include a statement by the insurer that the policy or policies will not be canceled or materially altered without at least 30 days' prior written notice to CJR.
Upon request, Franchisee also shall provide to CJR copies of all or any policies, and policy amendments and endorsements.
- E. Franchisee acknowledges that no requirement for insurance contained in this Agreement constitutes advice or a representation by CJR that only such policies, in such amounts, are necessary to protect Franchisee from losses in connection with its business under this Agreement.
Maintenance of this insurance, and the performance by Franchisee of its obligations under this Section, shall not relieve Franchisee of liability under the indemnification provisions of this Agreement.
- F. Should Franchisee, for any reason, fail to procure or maintain at least the insurance required by this Section 15, as revised from time to time pursuant to the OPM or otherwise in writing, CJR shall have the immediate right and authority, but not the obligation, to procure such insurance and charge its cost to Franchisee.
All out-of-pocket costs incurred by CJR in obtaining such insurance on behalf of Franchisee shall be reimbursed to CJR by Franchisee immediately upon Franchisee's receipt of an invoice therefor.
Source: Item 22 — CONTRACTS (FDD page 80)
What This Means (2024 FDD)
According to Carls's 2024 Franchise Disclosure Document, a franchisee must provide evidence of satisfactory insurance and proof of payment to CJR no later than the earliest of these dates: 30 days before the scheduled opening of the franchised restaurant, the date the franchisee takes possession of the location, or the date construction begins if the franchisee is responsible for construction. This requirement ensures that Carls restaurants are adequately insured from the moment operations begin, protecting both the franchisee and CJR from potential liabilities.
Furthermore, the franchisee must resubmit this evidence of insurance and proof of payment to CJR on each policy renewal date. This ongoing requirement ensures continuous coverage and compliance with Carls's insurance standards. The insurance provider must also notify CJR at least 30 days in advance if the policy is canceled or materially altered, giving Carls time to ensure continuous coverage.
Carls also retains the right, but not the obligation, to procure the necessary insurance if the franchisee fails to do so, charging the cost to the franchisee. This provision protects Carls from potential liability due to a franchisee's failure to maintain adequate insurance. The franchisee is then responsible for immediate reimbursement to CJR upon receiving an invoice for the insurance costs.
It is important to note that Carls states that the insurance requirements outlined in the franchise agreement do not constitute advice or a representation that these policies and amounts are sufficient to protect the franchisee from all potential losses. The franchisee remains liable under the indemnification provisions of the agreement, regardless of their insurance coverage. Therefore, prospective Carls franchisees should carefully review the required insurance coverage and consider obtaining additional coverage to adequately protect their business.