What happens if a Craters & Freighters franchisee fails to obtain or 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 the 2025 Craters & Freighters Franchise Disclosure Document, if a franchisee fails to obtain or maintain the required insurance, Craters & Freighters has the option, but not the obligation, to purchase insurance on the franchisee's behalf. If Craters & Freighters chooses to do so, the franchisee is responsible for reimbursing Craters & Freighters for the full cost of the insurance, along with a reasonable service charge to cover the time and effort Craters & Freighters spent securing the insurance. This reimbursement must be made within five days of receiving an invoice detailing these costs.
Furthermore, the FDD states that a franchisee's failure or refusal to obtain and maintain the required insurance constitutes a material breach of the Franchise Agreement. This gives Craters & Freighters the right to terminate the agreement or pursue other default remedies outlined in the agreement.
This clause is fairly standard in franchise agreements. It protects the Craters & Freighters brand from potential liabilities arising from underinsured or uninsured franchisees. It also ensures that the franchisee is operating legally and responsibly. Prospective franchisees should understand that maintaining adequate insurance is not just a suggestion but a strict requirement, and failure to comply can have serious consequences, including termination of the franchise agreement.