Is the failure to maintain insurance by a Craters & Freighters franchisee considered a breach of the Franchise Agreement?
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 the 2025 Craters & Freighters Franchise Disclosure Document, if a franchisee fails to obtain or maintain the required insurance, or fails to provide proof of insurance to Craters & Freighters, it constitutes a material breach of the Franchise Agreement. This gives Craters & Freighters the right to terminate the agreement or pursue other default remedies.
However, Craters & Freighters has the option, but not the obligation, to purchase insurance on behalf of the franchisee. If Craters & Freighters chooses to do so, the franchisee must reimburse Craters & Freighters for the full cost of the insurance, along with a reasonable service charge to compensate Craters & Freighters for their time and effort in securing the insurance. This reimbursement is due within five days of the date Craters & Freighters delivers an invoice detailing the costs and expenses to the franchisee.
This clause is fairly standard in franchise agreements. It protects the franchisor from liability due to the actions of a franchisee. It also ensures that all Craters & Freighters locations have adequate insurance coverage, which protects the brand's reputation. Prospective franchisees should ensure they understand the insurance requirements and can comply with them to avoid being in breach of the agreement.