Who must the Chatime franchisee's insurance policy name as additional insured parties?
Chatime Franchise · 2025 FDDAnswer from 2025 FDD Document
- (1) Franchisee Parties indemnify Franchisor and each of its Affiliates (Chatime Group) against all:
- (a) Losses incurred by the Chatime Group;
- (b) Liabilities incurred by the Chatime Group; and
- (c) All Legal Costs and other Costs and expenses incurred by the Chatime Group in connection with a demand, action, arbitration, or other proceeding (including mediation, compromise, out of court settlement or appeal),
arising directly or indirectly as a result of or in connection with:
- (d) A breach by Franchisee Parties of this Agreement or any Collateral Agreement;
- (e) Any injury to, or loss of property of, any person in or on premises from which the business is conducted;
- (f) Franchisee's taxes, liabilities or Costs of The Franchised Business;
- (g) Any negligent or willful act or omission of Franchisee, its employees, agents, servants, or contractors; and
- (h) Any warranty, promise, or representation made by Franchisee Parties or any employee, agent, or other person acting on behalf of Franchisee Parties being incomplete, inaccurate, or misleading.
Source: Item 23 — Receipts (FDD pages 58–262)
What This Means (2025 FDD)
Based on the 2025 Chatime Franchise Disclosure Document, the franchisee is required to indemnify Chatime Group, which includes Chatime and its Affiliates. This means the franchisee must protect Chatime Group against losses, liabilities, legal costs, and expenses arising from various situations. These situations include breaches of the franchise agreement, injuries or property loss on the business premises, the franchisee's taxes or liabilities, negligence or willful acts by the franchisee or their staff, and any incomplete, inaccurate, or misleading statements made by the franchisee.
In practical terms, this section of the FDD means that if a customer is injured at a Chatime location due to the franchisee's negligence, the franchisee is responsible for covering Chatime's legal expenses and any damages Chatime has to pay. Similarly, if the franchisee violates the franchise agreement, they must cover any resulting losses or legal costs incurred by Chatime. This requirement ensures that Chatime is protected from liabilities caused by the franchisee's actions or inactions.
While the FDD specifies that the franchisee must indemnify Chatime Group, it does not explicitly state that Chatime Group must be named as additional insured parties on the franchisee's insurance policies. It is common practice in franchising to require franchisees to name the franchisor as an additional insured on their insurance policies. This provides the franchisor with direct coverage under the franchisee's policy, offering an additional layer of financial protection.
Prospective Chatime franchisees should clarify with Chatime whether they are required to name Chatime Group as additional insured parties on their insurance policies. Understanding the specific insurance requirements is crucial for managing risk and ensuring compliance with the franchise agreement.