Under what conditions will Carls Jr. charge reimbursement of insurance costs?
Carls Franchise · 2024 FDDAnswer from 2024 FDD Document
| Type of Fee (1) | Amount | Due Date | Remarks |
|---|---|---|---|
| Reimbursement of Insurance Costs | Cost of obtaining coverage | Immediately upon receipt of invoice | If you fail to procure or maintain the required insurance, we may procure the insurance and charge its cost along with our out-of-pocket expenses to you. We collect the cost of the insurance coverage for the insurance company with which we place the coverage. |
Source: Item 6 — Other Fees (FDD pages 26–31)
What This Means (2024 FDD)
According to Carls's 2024 Franchise Disclosure Document, Carls may charge franchisees for reimbursement of insurance costs under specific circumstances. If a franchisee fails to procure or maintain the required insurance coverage, Carls has the right to procure the insurance themselves. In this case, Carls will charge the franchisee the cost of obtaining the coverage, along with any out-of-pocket expenses incurred by Carls. The franchisee is then responsible for paying this amount immediately upon receipt of an invoice from Carls. Carls collects the cost of the insurance coverage for the insurance company with which they place the coverage.
This policy ensures that all Carls locations maintain the necessary insurance coverage to protect the brand and mitigate potential risks. By allowing Carls to procure insurance on behalf of a non-compliant franchisee, the system maintains consistent coverage across all units. This protects Carls from potential liabilities arising from underinsured or uninsured franchise locations.
For a prospective franchisee, this means it is crucial to understand and comply with the insurance requirements outlined in the Franchise Agreement. Failure to do so not only puts the franchisee at risk but also gives Carls the right to step in and procure the necessary insurance, passing the costs on to the franchisee. While this ensures coverage, it may also result in higher costs than if the franchisee had obtained insurance independently, as Carls may not necessarily seek out the lowest-cost provider. Franchisees should clarify the specific insurance requirements and approved providers during their due diligence process to avoid unexpected expenses.