Can Cream require franchisees to obtain insurance policies from a designated supplier?
Cream Franchise · 2025 FDDAnswer from 2025 FDD Document
During the Term, you must maintain in force at your sole expense the types and amounts of insurance that we require and that comply with the terms of your Lease. We reserve the right to require that you obtain all or a portion of your insurance policies from a designated supplier and on the terms and according to the specifications we approve. The liability insurance must cover claims for bodily and personal injury, death, and property damage caused by or occurring in connection with your Shop's operation or activities of your personnel in the course of their employment. All of these policies must contain the minimum coverage we prescribe from time to time and must have deductibles not to exceed the amounts we specify. We may periodically increase the amounts of coverage required under these insurance policies and/or require different or additional insurance coverages (including reasonable excess liability insurance) at any time. These insurance policies must be purchased from licensed insurers having a rating of "A/VIII" or higher by the then-current edition of Best Insurance Reports published by A.M. Best Company (or other similar publication or criteria we designate).
Each insurance policy for liability coverage must name us and any of our affiliates or other designees that we specify as additional named insureds, using a form of endorsement that we have approved, and provide for 30 days' prior written notice to us of a policy's material modification, cancellation, or expiration. Each insurance policy must contain a waiver of all subrogation rights against us and any of our affiliates or other designees that we specify. You must routinely furnish to us copies of your Certificates of Insurance or other evidence of your maintaining this insurance coverage and paying premiums. If you fail or refuse to obtain and maintain the insurance we specify, in addition to our other remedies including termination, we may (but are not required to) obtain such insurance for you and your Shop on your behalf, in which event you agree to cooperate with us and reimburse us on demand for 120% of the costs of all premiums.
Source: Item 23 — RECEIPTS (FDD pages 61–192)
What This Means (2025 FDD)
According to Cream's 2025 Franchise Disclosure Document, Cream has the right to mandate that franchisees obtain their insurance policies from a supplier that they designate. The franchisee is responsible for maintaining the types and amounts of insurance Cream requires, adhering to the terms of their lease agreement.
The insurance must cover claims related to bodily injury, death, personal injury, and property damage that occur due to the Cream shop's operations or the activities of its personnel. These policies must meet the minimum coverage amounts Cream prescribes and have deductibles that do not exceed specified amounts. Cream can also increase coverage amounts or require different/additional insurance at any time.
Cream also stipulates that insurance policies must be purchased from licensed insurers with a rating of "A/VIII" or higher by A.M. Best Company. Furthermore, Cream and its affiliates must be named as additional insureds on liability coverage policies, and Cream must receive 30 days' prior written notice of any material modification, cancellation, or expiration of a policy. 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 option to obtain insurance on the franchisee's behalf and charge them 120% of the premium costs.