What happens if a Desi District franchisee fails to comply with the insurance requirements?
Desi_District Franchise · 2024 FDDAnswer from 2024 FDD Document
chise Group requires, including any national or regional brand conventions. Franchisee shall not permit the Principal Executive to fail to attend more than three consecutive required meetings.
7.15 Insurance.
- (a) Franchisee shall obtain and maintain insurance policies in the types and amounts as specified by Desi District Franchise Group in the Manual. If not specified in the Manual, Franchisee shall maintain at least the following insurance coverage:
- (i) "Special" causes of loss coverage forms, including fire and extended coverage, crime, vandalism, and malicious mischief, on all property of the Business, for full repair and replacement value (subject to a reasonable deductible);
- (ii) Business interruption insurance covering at least 12 months of income;
- (iii) Commercial General Liability insurance, including products liability coverage, and broad form commercial liability coverage, written on an "occurrence" policy form in an amount of not less than $1,000,000 single limit per occurrence and $2,000,000 aggregate limit;
- (iv) Business Automobile Liability insurance including owned, leased, non-owned and hired automobiles coverage in an amount of not less than $1,000,000; and
- (v) Workers Compensation coverage as required by state law.
- (b) Franchisee's policies (other than Workers Compensation) must (1) list Desi District Franchise Group and its affiliates as an additional insured, (2) include a waiver of subrogation in favor of Desi District Franchise Group and its affiliates, (3) be primary and non-contributing with any insurance carried by Desi District Franchise Group or its affiliates, and (4) stipulate that Desi District Franchise Group shall receive 30 days' prior written notice of cancellation.
- (c) Franchisee shall provide Certi
Source: Item 22 — CONTRACTS (FDD page 52)
What This Means (2024 FDD)
According to Desi District's 2024 Franchise Disclosure Document, franchisees must maintain specific insurance policies. These include "Special" causes of loss coverage, business interruption insurance covering at least 12 months of income, Commercial General Liability insurance of not less than $1,000,000 single limit per occurrence and $2,000,000 aggregate limit, Business Automobile Liability insurance of not less than $1,000,000, and Workers Compensation coverage as required by state law. Franchisees must provide certificates of insurance to Desi District Franchise Group before opening, upon annual renewal, and at any time upon request.
The FDD excerpt does not explicitly state the consequences of failing to comply with insurance requirements. However, it is standard franchise practice that failure to maintain adequate insurance coverage constitutes a breach of the franchise agreement.
Without specific details in this excerpt, it is important for a prospective Desi District franchisee to ask the franchisor about the exact ramifications of non-compliance. This could include potential penalties, the franchisor's right to obtain coverage on the franchisee's behalf (at the franchisee's expense), or even termination of the franchise agreement. Understanding these consequences is crucial for assessing the risks and obligations associated with the franchise.