How does the Cream franchisee's obligation to maintain insurance (Item 9) protect them against potential liabilities arising from customer injuries or property damage?
Cream Franchise · 2025 FDDAnswer from 2025 FDD Document
otal purchases to operate your Shop.
Insurance
You must maintain in force at your sole expense insurance policies for your Shops as required under applicable law and your Lease, and in minimum types and amounts of coverage we require. Currently, our requirements include the following for each Shop:
| Policy/Coverage Type | Minimum Limits |
|---|---|
| Commercial Property Insurance | Full replacement cost value of all leasehold improvements, |
| furniture, fixtures, equipment, and inventory on a special form | |
| basis. This coverage must also include (i) flood and earthquake | |
| coverage in geographically prone | |
| zones, (ii) business income | |
| and extra expense coverage for 12 months for actual losses | |
| sustained or at least 50% of your annual revenue, (iii) rent and | |
| royalties due to us, and (iv) extended business income coverage | |
| for 180 days. | |
| Commercial General Liability | $1,000,000 per occurrence |
| and | |
| $2,000,000 in the aggregate, | |
| including bodily injury and property damage; $2,000,000 | |
| products liability, personal and advertising liability, and products | |
| and completed operations coverage. | |
| Auto Liability | $1,000,000 combined single limit for all owned, hired, and non |
| owned automobiles used in connection with your Shop(s). |
| Policy/Coverage Type | Minimum Limits | |
|---|---|---|
| Commercial Property Insurance | Full replacement cost value of all leasehold improvements, | |
| furniture, fixtures, equipment, and inventory on a special form | ||
| basis. This coverage must also include (i) flood and earthquake | ||
| coverage in geographically prone zones, (ii) business income | ||
| and extra expense coverage for 12 months for actual losses | ||
| sustained or at least 50% of your annual revenue, (iii) rent and | ||
| royalties due to us, and (iv) extended business income coverage | ||
| for 180 days. | ||
| Commercial General Liability | $1,000,000 per occurrence and $2,000,000 in the aggregate, | |
| including bodily injury and property damage; $2,000,000 | ||
| products liability, personal and advertising liability, and products | ||
| and completed operations coverage. | ||
| Auto Liability | $1,000,000 combined single limit for all owned, hired, and non- | |
| owned automobiles used in connection with your Shop(s). |
Purchase Arrangements, Material Benefits, and Revenue
We may from time to time negotiate purchase arrangements with suppliers of products and services to franchisees, including price terms, though we have not currently done so. We have not established purchasing or distribution cooperatives.
What This Means (2025 FDD)
According to Cream's 2025 Franchise Disclosure Document, franchisees are required to maintain specific insurance policies to protect against potential liabilities. The Commercial General Liability insurance, with a minimum coverage of $1,000,000 per occurrence and $2,000,000 in the aggregate, covers bodily injury and property damage. This insurance extends to products liability, personal and advertising liability, and products and completed operations coverage.
Additionally, Cream requires franchisees to have Commercial Property Insurance, covering the full replacement cost value of leasehold improvements, furniture, fixtures, equipment, and inventory. This policy must include flood and earthquake coverage in geographically prone zones, business income and extra expense coverage for 12 months (or at least 50% of annual revenue), rent and royalties due to Cream, and extended business income coverage for 180 days. Auto Liability insurance is also mandated, providing $1,000,000 combined single limit for all owned, hired, and non-owned automobiles used in connection with the Cream shop.
Cream also mandates that the franchisee names Cream and its affiliates as additional insureds on their liability coverage policies and provides them with 30 days' notice of any material modification, cancellation, or expiration of the policy. Cream also requires a waiver of subrogation rights against them and their affiliates. Franchisees must provide Cream with copies of their insurance certificates as proof of coverage and premium payments. If a franchisee fails to maintain the required insurance, Cream has the right to obtain insurance on their behalf and charge the franchisee 120% of the premium costs.
These insurance requirements ensure that Cream franchisees are adequately protected against a range of potential liabilities, including customer injuries, property damage, and other unforeseen events. By maintaining these insurance policies, franchisees can mitigate financial risks and ensure the continued operation of their Cream shop.