During the Initial Term of the Chatime agreement, what is the Franchisee required to do regarding insurance policies?
Chatime Franchise · 2025 FDDAnswer from 2025 FDD Document
5.3 Insurance
- (1) From the date of this Agreement and at all times during the Initial Term (including, if appropriate, the New Term), Franchisee must at its cost take out and maintain in full force and effect the Insurance Policies with reputable insurers which comply with all Legal Requirements and on terms and conditions acceptable to Franchisor.
- (2) Franchisee must also maintain in force all other insurance of the types, in the amounts, and with such terms and conditions as Franchisor may from time to time reasonably prescribe, in the Operations Manual or otherwise.
- (3) The Insurance Policy must:
- (a) Name Franchisor and its Affiliates that it designates as additional insured parties;
- (b) Contain a waiver of all subrogation rights against Franchisor, its Affiliates, and their successors and assigns;
- (c) Contain primary and noncontributory provisions, and be occurrence-based with per-location aggregate;
- (d) Be provided by an A- VII or higher AM Best-rated carrier;
- (e) Provide for 30 days' prior written notice to Franchisor of any material modification, cancellation, or expiration of such policy; and
- (f) Include coverage for a minimum liability of no less than the amount specified by Franchisor.
- (4) Franchisee must provide Franchisor at least annually and on request by Franchisor a copy
Source: Item 23 — Receipts (FDD pages 58–262)
What This Means (2025 FDD)
According to Chatime's 2025 Franchise Disclosure Document, franchisees must obtain and maintain specific insurance policies throughout the Initial Term of their agreement. Franchisees are responsible for covering the costs of these insurance policies, which must be secured with reputable insurers and adhere to all legal requirements, with terms and conditions acceptable to Chatime. These policies are referred to as "Insurance Policies", which Chatime may update from time to time in the future, in order to address changing exposures and evolving risk factors. Chatime will notify the franchisee of any changes to the insurance requirements, and the franchisee must comply with the updated coverage standard.
The required insurance must name Chatime and its designated affiliates as additional insured parties and include a waiver of subrogation rights against them. The policies must also contain primary and noncontributory provisions, be occurrence-based with per-location aggregate coverage, and be provided by an A- VII or higher AM Best-rated carrier. Furthermore, the insurance policies must provide Chatime with at least 30 days' prior written notice of any material modification, cancellation, or expiration, and include coverage for a minimum liability amount specified by Chatime.
Chatime franchisees must provide Chatime with a copy of their insurance policies at least annually and upon request. Some property owners may require higher levels of commercial general liability insurance or other insurance coverage under their leases. This means franchisees need to be prepared to adjust their coverage to meet landlord requirements, potentially increasing their insurance costs. Failing to maintain the required insurance coverage could result in a breach of the franchise agreement, so it is crucial for franchisees to understand and comply with these obligations.