How does the Cream franchisee's obligation to maintain insurance (Item 9) relate to the potential for unforeseen expenses that are not covered in the initial investment estimate (Item 7)?
Cream Franchise · 2025 FDDAnswer from 2025 FDD Document
greements and in other items of this Disclosure Document.**
| 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. |
| Obligation | Section in Agreement |
| (a) Site selection and acquisition/lease | Franchise Agreement - Sections 2.A and 2.B |
| Obligation | Section in Agreement |
| Area Development Agreement – Section 2 | |
| (b) Pre-opening purchases/leases | Franchise Agreement - Sections 2.B and 2.C Area Development Agreement – N/A |
| (c) Site development and other pre- | Franchise Agreement - |
| opening requirements | Section 2 Area Development Agreement – Section 2 |
| (d) Initial and ongoing training | Franchise Agreement - Section 4 Area Development Agreement – N/A |
| (e) Opening | Franchise Agreement - Sections 2.C Area Development Agreement – N/A |
| (f) Fees | Franchise Agreement - Section 3 Area Development Agreement – Section 2.A |
| (g) Compliance with standards and | Franchise Agreement - |
| policies/operating manual | Sections 4.E and 8 Area Development Agreement – N/A |
| (h) Trademarks and proprietary | Franchise Agreement - |
| information | Sections 5 and 6 Area Development Agreement – Section 3.A |
| (i) Restrictions on products/services | Franchise Agreement - |
| offered | Sections 8.C, 8.D, 8.F, and 8.I Area Development Agreement – N/A |
| Obligation | Section in Agreement |
| (j) Warranty and customer service | Franchise Agreement - |
| requirements | Sections 8.G Area Development Agreement – N/A |
| (k) Territorial development and sales | Franchise Agreement - |
| quotas | Section 1.E Area Development Agreement – Section 1.D |
| (l) On-going product/service purchases | Franchise Agreement - Sections 8.C and 8.D Area Development Agreement – N/A |
| (m) Maintenance, appearance, and | Franchise Agreement - |
| remodeling requirements | Sections 8.A, 8.B and 11.A Area Development Agreement – N/A |
| (n) Insurance | Franchise Agreement - Section 8.H Area Development Agreement – N/A |
| (o) Advertising | Franchise Agreement - Section 9 Area Development Agreement – N/A |
| (p) Indemnification | Franchise Agreement - Sections 16.D Area Development Agreement – Section 6.C |
| (q) Owner’s participation/ | Franchise Agreement - |
| management/staffing | Sections 1.C, 8.E, 8.L Area Development Agreement – Section 1.C |
| (r) Records and reports | Franchise Agreement - Section 10 Area Development Agreement – Section 2.E |
ITEM 10 FINANCING
We do not offer direct or indirect financing. We do not guarantee your promissory notes, mortgages, leases, or other obligations.
ITEM 11 FRANCHISOR'S ASSISTANCE, ADVERTISING, COMPUTER SYSTEMS, AND TRAINING
Except as listed below, we are not required to provide you with any assistance.
Prior to Opening Your Shop
Before you begin operating your Shop, we or our designees will:
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- If you have not received approval for a Premises for your Shop upon signing your agreement, we will review and approve or disapprove a proposed site for your Shop (Area Development Agreement, Section 2.C; Franchise Agreement – Sections 2.A).
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- Review and approve or disapprove the Construction Plans and Lease (each defined below) for your Shop. Other than the Proprietary Products sold by Parent, we do not directly provide, deliver, or install any equipment, signs, fixtures, opening inventory, or supplies for our franchisees (Franchise Agreement – Section 2.B and 2.C).
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- If you are opening your first Jeni's Ice Creams Scoop Shop, provide the Initial Training Program to your Mandatory Trainees (Franchise Agreement – Section 4.A).
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- If you are opening your first Jeni's Ice Creams Scoop Shop, provide on-site opening support for five days in connection with your grand opening (Franchise Agreement – Section 4.C).
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- Make our Brand Manual available to you (Franchise Agreement − Section 4.E).
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- Approve or disapprove your grand opening advertising program (Franchise Agreement Section 9.A).
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- Review and either approve or disapprove your Shop to open for business (Franchise Agreement – Section 2.C).
Site Selection
You are responsible for selecting a site for your Premises and obtaining our approval of that site. Neither we nor our affiliates generally own the sites for Jeni's Ice Creams Scoop Shops or lease any such sites to franchisees. If you have not located a site for the Premises when you sign the Franchise Agreement, we will identify a site selection area in your Franchise Agreement, and unless you have our prior written approval, you will not be permitted to search for a site outside of that site selection area. You must send us all of the information we require to evaluate each proposed site. You must obtain our approval of you site within 120 days after signing the Franchise Agreement. We will make all determinations about whether to approve a site based on our then-current criteria, including visibility, size, layout, adjacent uses, parking, demographics, local competition, and other factors. If we elect to visit any site in person, we will not charge a fee in connection with the first site evaluation visit;
What This Means (2025 FDD)
According to Cream's 2025 Franchise Disclosure Document, Item 9 outlines the franchisee's obligation to maintain specific insurance policies, while Item 7 provides an estimate of the initial investment required to start the franchise. The insurance requirements in Item 9 are directly related to managing potential unforeseen expenses, as these policies are designed to cover specific risks that could lead to significant financial losses, which may not be fully accounted for in the initial investment estimate.
Item 7 includes an estimated cost for insurance, listed as $500 to $750 for three months. However, this is just an initial estimate. Item 9 details the types and minimum coverage amounts Cream requires, 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). These insurance policies protect the franchisee from potentially substantial costs associated with events like employee injuries, lawsuits, food contamination, data breaches, and other unforeseen liabilities. The actual costs of these policies can vary based on factors like the franchisee's location, claims history, and the insurance provider's rates.
The initial investment estimate in Item 7 includes a line item for "Additional Funds – First 3 Months of Operation," ranging from $15,000 to $30,000, intended to cover initial start-up expenses not specifically listed. However, this amount may not be sufficient to cover all potential unforeseen expenses, especially if a significant insurable event occurs. Therefore, maintaining the required insurance coverage is crucial for protecting the franchisee's investment and ensuring the business's financial stability. A Cream franchisee should carefully review the insurance requirements and consult with an insurance professional to determine the appropriate coverage levels and costs for their specific circumstances, as these costs can fluctuate and impact the overall financial health of the franchise.
In summary, while Item 7 provides an initial estimate for various costs, including insurance, it is Item 9 that specifies the mandatory insurance coverage a Cream franchisee must maintain. These insurance policies are essential for mitigating the financial impact of unforeseen events that could otherwise lead to substantial expenses not fully covered in the initial investment estimate. Prospective franchisees need to understand the scope and costs of these insurance requirements to accurately assess the financial risks and potential liabilities associated with operating a Cream franchise.