What are the consequences if a Cream franchisee fails to meet their insurance obligations as outlined in Item 9, considering the franchisor's lack of direct financing in Item 10?

According to Cream's 2025 Franchise Disclosure Document, maintaining the required insurance coverage is a critical obligation for franchisees. Item 9 outlines the specific insurance policies and coverage amounts franchisees must secure, including Workers’ Compensation, Umbrella Liability (not less than $3,000,000), Trade Name Restoration/Food Borne Illness ($1,000,000), Employment Practices Liability ($1,000,000), and Cyber Liability ($1,000,000). Failure to maintain this insurance can lead to significant repercussions. Since Item 10 indicates that Cream does not offer direct or indirect financing, franchisees must independently secure the necessary capital to cover these insurance costs.

Specifically, Item 23 states that Cream may terminate the Franchise Agreement if a franchisee fails to maintain the required insurance and does not correct this failure within 10 days after receiving written notice. This means a Cream franchisee has a very short window to rectify any lapse in their insurance coverage. The termination would be effective immediately upon delivery of written notice.

Given that Cream does not provide financing, franchisees must ensure they have sufficient financial resources to cover insurance premiums and address any potential gaps in coverage promptly. The strict enforcement of insurance requirements, coupled with the lack of franchisor financing, underscores the importance of careful financial planning and risk management for prospective Cream franchisees. Failing to meet these insurance obligations can result in the termination of the franchise agreement, leading to a loss of the business and associated investments.