Under what conditions is earthquake insurance required for a Carls franchise location?
Carls Franchise · 2024 FDDAnswer from 2024 FDD Document
- (4) Commercial Property insurance that extends coverage on a replacement cost basis for the Franchised Restaurant, business personal property (including electronic equipment, tenant improvements & betterments), and business income and extra expense for a minimum of 12 months or actual loss sustained to cover loss of profits, continuing expenses and loss of rents. Covered causes of loss should be "Special Form" or "All Risk" with coinsurance conditions not less than 80%. Flood insurance is also required for locations that reside in FEMA Flood Zones beginning with the letters "A" or "V." Earthquake insurance is also required for locations that reside in FEMA Seismic Design Categories "E" or "D."
Source: Item 22 — CONTRACTS (FDD page 80)
What This Means (2024 FDD)
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." Additionally, Carls requires franchisees to maintain commercial property insurance that extends coverage on a replacement cost basis for the Franchised Restaurant, business personal property, tenant improvements, and business income and extra expense for a minimum of 12 months to cover loss of profits, continuing expenses, and loss of rents.
Carls also mandates flood insurance for locations that reside in FEMA Flood Zones beginning with the letters "A" or "V." The commercial property insurance should have covered causes of loss under a "Special Form" or "All Risk" policy, with coinsurance conditions not less than 80%.
It is important for prospective Carls franchisees to understand these insurance requirements, as failure to maintain the required insurance coverage could result in Carls procuring the insurance and charging the cost to the franchisee. Franchisees should consult with insurance professionals to ensure they obtain adequate coverage that meets Carls's requirements and protects their investment.