What obligations does a Cream franchisee have regarding insurance coverage, as detailed in Item 9, and how might these costs affect the estimated initial investment presented in Item 7?
Cream Franchise · 2025 FDDAnswer from 2025 FDD Document
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| 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 Cream's 2025 Franchise Disclosure Document, franchisees are obligated to maintain specific insurance coverage, as detailed in Item 9. These insurance requirements include Workers’ Compensation with statutory minimum coverage amounts and an employer liability minimum limit of $1,000,000, Umbrella Liability of not less than $3,000,000 in excess of other liabilities, Trade Name Restoration/Food Borne Illness coverage of $1,000,000, Employment Practices Liability with a $1,000,000 limit, and Cyber Liability of $1,000,000.
The cost of these insurance policies directly impacts the estimated initial investment for a Cream franchise. Item 7 includes an 'Insurance' estimate, which covers the cost of quarterly premiums for the required insurance. The FDD notes that insurance premiums may be payable monthly, quarterly, semi-annually, or annually, depending on the insurance company's practices and the franchisee's creditworthiness.
Prospective Cream franchisees should carefully consider these insurance requirements and obtain quotes from insurance providers to accurately assess their potential costs. These costs can vary based on factors such as location, coverage limits, and the franchisee's risk profile. Understanding the full scope of insurance obligations is crucial for budgeting and financial planning when investing in a Cream franchise.