How does the Cream franchisee's obligation to maintain insurance (Item 9) protect them against potential losses due to natural disasters or other unforeseen events?
Cream Franchise · 2025 FDDAnswer from 2025 FDD Document
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:
| Workers’ Compensation | Statutory minimum coverage amounts, with employer liability minimum limit of $1,000,000. |
|---|---|
| Umbrella Liability | Not less than $3,000,000 to be in excess of Commercial General Liability, Auto Liability, and Employer’s Liability. |
| Trade Name Restoration/Food Borne Illness | $1,000,000 to cover lost profits due to any alleged or actual contamination, supplier contamination, inoculations, and testing. Coverage must also include crisis management expense coverage. |
| Employment Practices Liability | $1,000,000 limit for coverage of any wrongful employment action and third-party coverage for harassment and discrimination of non-employees. Coverage must name us as co- defendant. |
| Cyber Liability | $1,000,000 to insure any first- or third-party claims including data breach, identity theft, phishing attacks, ransomware, bricking, crisis management expense, defense expenses, and notifications costs. |
What This Means (2025 FDD)
According to the 2025 FDD, Cream franchisees are required to maintain specific insurance policies to protect their shops. While the FDD does not explicitly list coverage for natural disasters, it does outline several mandatory insurance types that could offer some protection against unforeseen events.
Specifically, Cream requires franchisees to carry Trade Name Restoration/Food Borne Illness insurance with a $1,000,000 limit. This covers lost profits due to contamination, supplier issues, and related expenses, including crisis management. Franchisees must also maintain Cyber Liability insurance with a $1,000,000 limit, protecting against data breaches, identity theft, ransomware, and associated costs. Additionally, Cream mandates Employment Practices Liability coverage of $1,000,000 to cover wrongful employment actions and third-party harassment or discrimination claims, naming Cream as a co-defendant.
It is important to note that Cream's minimum insurance requirements are not warranties that the coverage is sufficient for the franchisee's operations. The FDD states that these requirements represent only the minimum coverage Cream deems acceptable to protect its own interests. Cream is not responsible if a franchisee's losses exceed their insurance coverage. Therefore, it is the franchisee's sole responsibility to obtain adequate insurance coverage based on their own independent investigation and risk assessment. A prospective franchisee should discuss specific risks like natural disasters with an insurance professional to determine appropriate coverage levels beyond the minimums required by Cream.