Under what circumstances is earthquake insurance required for a Carls franchise location?

According to Carls's 2024 Franchise Disclosure Document, earthquake insurance is required for franchise locations that reside in FEMA Seismic Design Categories "E" or "D." Franchisees must obtain commercial property insurance that extends coverage on a replacement cost basis for the Franchised Restaurant, business personal property, and business income.

In addition to earthquake insurance, Carls also requires flood insurance for locations that reside in FEMA Flood Zones beginning with the letters "A" or "V." The commercial property insurance should cover loss of profits, continuing expenses, and loss of rents for a minimum of 12 months or actual loss sustained. The covered causes of loss should be "Special Form" or "All Risk" with coinsurance conditions not less than 80%.

Carls also mandates that all insurance policies be in full force and effect, and franchisees must submit evidence of satisfactory insurance and proof of payment to CJR no later than 30 days prior to the scheduled opening date of the Franchised Restaurant, the date the franchisee takes possession of the Franchised Location, or the date construction commences at the Franchised Location. On each policy renewal date, franchisees must again submit evidence of satisfactory insurance and proof of payment to CJR. The evidence of insurance should include a statement by the insurer that the policy will not be canceled or materially altered without at least 30 days' prior written notice to CJR.