What actions can Craters & Freighters take if a franchisee fails to maintain the required insurance?
Craters_Freighters Franchise · 2025 FDDAnswer from 2025 FDD Document
13.4 Failure or Refusal to Obtain and Maintain Insurance. In the event Franchisee fails or refuses to obtain the required insurance, to keep the same in full force and effect, or to provide Franchisor with proof of insurance, Franchisor may, but will not be obligated to, purchase insurance on Franchisee's behalf from an insurance carrier of Franchisor's choice, and Franchisee must reimburse Franchisor for the full cost of such insurance, along with a reasonable service charge to compensate Franchisor for the time and effort expended to secure such insurance, within five (5) days of the date Franchisor delivers an invoice detailing such costs and expenses to Franchisee. Notwithstanding the foregoing, the failure or refusal of Franchisee to obtain and maintain insurance constitutes a material breach of this Agreement entitling Franchisor to terminate this Agreement or exercise any or a combination of the other default remedies set forth in this Agreement.
Source: Item 22 — CONTRACTS (FDD pages 49–50)
What This Means (2025 FDD)
According to Craters & Freighters' 2025 Franchise Disclosure Document, if a franchisee fails to maintain the required insurance, Craters & Freighters has the option to take specific actions. Craters & Freighters is not obligated to purchase insurance on behalf of the franchisee. However, if Craters & Freighters chooses to do so, it can purchase insurance from a carrier of its choice.
The franchisee is then required to reimburse Craters & Freighters for the full cost of the insurance. Additionally, the franchisee must pay a reasonable service charge to compensate Craters & Freighters for the time and effort spent securing the insurance. This reimbursement and service charge are due within five days of the date Craters & Freighters delivers an invoice detailing these costs to the franchisee.
Furthermore, the FDD states that the failure or refusal to obtain and maintain insurance constitutes a material breach of the Franchise Agreement. This gives Craters & Freighters the right to terminate the agreement or pursue any other default remedies outlined in the agreement. This could have significant financial and operational consequences for the franchisee, potentially leading to the loss of their franchise.