What are the Carls Jr. franchisee's obligations regarding the maintenance of insurance coverage in Item 9, and how do these obligations relate to the franchisor's requirements for insurance as described in the franchise agreement?
Carls_Jr Franchise · 2025 FDDAnswer from 2025 FDD Document
stances, we simply pass through the franchisee payments to the designated vendor, supplier or landlord.
The funds contributed were used primarily to offset the cost of point of purchase associated with promoting Carl's Jr. products and other production advertising costs.
You must, at your sole expense, maintain in full force and effect throughout the term of each agreement that insurance that you determine is necessary or appropriate for liabilities caused by or occurring in connection with the development or operation of the Franchised Restaurant, which shall include, at a minimum, insurance policies of the kinds, and in the amounts, required by us. (Franchise Agreement, § 17; Development Agreement, § 7.). We may regulate the types, amounts, terms and conditions of insurance coverage required for the Franchised Restaurant, and standards for underwriters of policies providing required insurance coverage. You will receive written notice of these modifications, and you must take prompt action to comply. We, and any entity with an insurable interest designated by us, shall be an additional insured in such liability policies, except for workers' compensation/employer's liability, and loss payee for property to the extent each has an insurable interest. All insurance policies must be written by an insurance company (or companies) satisfactory to us in compliance with the standards, specifications, coverages and limits set forth in the OPM or otherwise provided to you in writing.
These required insurance policies include, at a minimum, the following: (1) Commercial General Liability insurance with policy limits not less than $5,000,000 per occurrence and in the aggregate. Coverage shall apply per location, including coverage for contractual liability, broad form property damage, personal and advertising injury, product liability and completed operations, not to exclude food-borne illness, as well as Damage to Rented Premises coverage with limits not less than $100,000; (2) Automobile Liability coverage, including owned, leased, non-owned and hired vehicles, with a combined single limit not less than $1,000,000 per accident and additional liability coverage as needed for delivery services. This may be included as part of a package policy; (3) Workers' Compensation, statutory as required by law, and Employer's Liability insurance with limits not less than $500,000, and such other insurance as may be required by the state or locality in which the Franchised Restaurant is operated. This coverage shall also be in effect for all of Franchisee's employees who participate in any of the training programs described in the Franchise Agreement; The required limits in (1) – (3) above may be satisfied through a combination of Primary and Umbrella/Excess Liability coverage. If satisfied through an Umbrella/Excess Liability coverage, the Umbrella/Excess Liability must be "following form" of the underlying Commerical General Liability, Automobile Liability and Employer's Liability coverages; (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"; (5) Cyber Liability (network security/data privacy) with policy limits not less than $1,000,000 per occurrence; and (6) In connection with any construction, leasehold improvements, renovation, refurbishment, or remodeling of the Franchised Restaurant, your general contractor shall maintain Commercial General Liability insurance (with products liability and independent contractors coverage), Automobile Liability coverage for owned, leased, hired and non-owned vehicles, and Builder's Risk with limits no less than $1,000,000, with CJR named as an additional insured, as well as Workers' Compensation and Employer's Liability as required by state law.
ITEM 9 FRANCHISEE'S OBLIGATIONS
**This table lists your principal obligations under the Franchise and Development Agreements.
What This Means (2025 FDD)
According to the 2025 FDD, Carls Jr. franchisees are obligated to maintain insurance coverage throughout the term of their agreement. This insurance must cover liabilities related to the development or operation of the franchised restaurant. The specific types and amounts of insurance must meet Carls Jr.'s requirements, which Carls Jr. can modify with written notice. Carls Jr. and any entities they designate with an insurable interest must be included as additional insured parties in liability policies, except for workers' compensation/employer's liability, and as loss payees for property coverage to the extent each has an insurable interest. All insurance policies must be written by an insurance company satisfactory to Carls Jr. and comply with the standards outlined in the OPM or other written communications.
The required insurance policies include Commercial General Liability insurance with policy limits not less than $5,000,000 per occurrence and in the aggregate, covering contractual liability, broad form property damage, personal and advertising injury, product liability and completed operations, not to exclude food-borne illness, as well as Damage to Rented Premises coverage with limits not less than $100,000; Automobile Liability coverage, including owned, leased, non-owned and hired vehicles, with a combined single limit not less than $1,000,000 per accident and additional liability coverage as needed for delivery services; and Workers' Compensation, statutory as required by law, and Employer's Liability insurance with limits not less than $500,000, and such other insurance as may be required by the state or locality in which the Franchised Restaurant is operated.
Carls Jr. also has general requirements for each insurance policy. The insurance policy must be endorsed to ensure its coverage is primary, and any insurance held by additional insured parties or loss payees is excess and non-contributory. The policy cannot limit or reduce coverage if Carls Jr. or its affiliates make a claim. It must cover all obligations and liabilities of the franchisee to third parties and any items for which the franchisee must indemnify Carls Jr. The insurance company must have an "A- VIII" or better rating from A.M. Best Company (or another rating service designated by CJR) and be satisfactory to Carls Jr. The deductible cannot exceed $100,000 unless Carls Jr. approves it in writing. The policy must include a waiver of subrogation endorsement favoring Carls Jr. and its affiliates. Carls Jr. and its affiliates must be named as additional insured parties on a primary and non-contributory basis for Commercial General Liability, Automobile Liability, and Umbrella/Excess Liability policies, and as loss payees for Commercial Property coverage.
Franchisees must ensure all required insurance policies are in full force and effect and provide Carls Jr. with evidence of satisfactory insurance and proof of payment. This must be done no later than 30 days before the scheduled opening date of the restaurant, the date the franchisee takes possession of the location, or the date construction begins if the franchisee is responsible for construction. On each policy renewal date, the franchisee must again submit evidence of satisfactory insurance and proof of payment to Carls Jr. The evidence of insurance must include a statement from the insurer that the policy will not be canceled, materially changed, or non-renewed without at least 30 days' prior written notice to Carls Jr.