What is the minimum business income and extra expense coverage period required for Cream franchisees under the Commercial Property Insurance?
Cream Franchise · 2025 FDDAnswer from 2025 FDD Document
| 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. |
Source: Item 8 — RESTRICTIONS ON SOURCES OF PRODUCTS AND SERVICES (FDD pages 22–24)
What This Means (2025 FDD)
According to Cream's 2025 Franchise Disclosure Document, franchisees are required to maintain Commercial Property Insurance that includes business income and extra expense coverage. This coverage must extend for a minimum of 12 months to cover actual losses sustained, or alternatively, it must cover at least 50% of the franchisee's annual revenue.
This requirement ensures that Cream franchisees have sufficient financial protection to cover ongoing expenses and lost income in the event of property damage or other disruptions that may temporarily halt business operations. The "business income and extra expense coverage" helps to mitigate financial risks associated with unexpected events, allowing the franchisee to recover and resume operations more smoothly.
In addition to the business income and extra expense coverage, the Commercial Property Insurance must also include flood and earthquake coverage in geographically prone zones, coverage for rent and royalties due to Cream, and extended business income coverage for 180 days. These additional coverages provide further protection against various potential risks and liabilities that Cream franchisees may face.
Prospective Cream franchisees should carefully review the insurance requirements and consult with insurance professionals to ensure they obtain adequate coverage that meets the franchisor's stipulations and protects their investment. Understanding the specific terms and conditions of the required insurance policies is crucial for mitigating potential financial losses and maintaining compliance with the franchise agreement.