Is a Devon Creek franchisee required to obtain and maintain insurance coverage?
Devon_Creek Franchise · 2024 FDDAnswer from 2024 FDD Document
your costs for ongoing operation.
In addition to the purchases or leases described above, you must obtain and maintain, at your own expense, the insurance coverage that we periodically require. We may regulate the types, amounts, terms and conditions of insurance coverage required for your Franchised Business and standards for underwriters of policies providing required insurance coverage; our protection and rights under the policies as an additional named insured; required or impermissible insurance contract provisions; assignment of policy rights to us; periodic verification of insurance coverage that must be furnished to us; our right to obtain insurance coverage at your expense if you fail to obtain required coverage; our right to defend claims; and similar matters relating to insured and uninsured claims.
You must obtain the following insurance coverages:
Liability. Comprehensive general liability insurance, including errors and omissions coverage, personal and advertising injury coverage, and in the form of a general liability rider or as a separate policy, in the amount of at least One-Million Dollars ($1,000,000) per occurrence and Two-Million Dollars ($2,000,000) in the aggregate; Coverage must include, but shall not be limited to, liability arising out of bodily injury, property damage, premises, operations, products-completed operations, contractual liability, personal injury, advertising injury, where applicable snow removal, and:
- Business Property
- Business Interruption
- Employer Liability
- Employment Practices
- Automobile- Trucks & Trailers
- Workers Compensation
- Other Insurances- as required by local, state and federal laws; and by the landlord
- Insurance Carrier- Minimum rating of "A" by AM Best
Employment. Worker's compensation coverage in the limits required by state law or if no statutory minimum exist, $500,000 per occurrence in full compliance with the applicable laws, statutes, rules or regulations of the State(s) in which Franchisee is located.
Employer Liability. Employer Liability insurance in the amount of One Million Dollars ($1,000,000) per occurrence per employee.
Employment Practices. Employment Practices insurance in the amount of at least One Hundred Thousand Dollars ($100,000), shall be carried on all of Franchisee's employees, as well as such other insurance as may be required by statute or rule of the state in which the Franchised Business is located and operated.
Business Property. Business Property insurance should be in the amount of a least replacement cost.
Business Interruption. Business Interruption insurance should be in the amount of at least Twelve (12) months loss of income including coverage for the franchisor's royalty fees and co-insurance requirements.
Automobile. Commercial Vehicle insurance in the amount of at least a combined single limit for bodily and property damage of at least a One-Million Dollars ($1,000,000), or greater if required by state law. Coverage shall include all owned, non-owned, and hired autos. If allowable by law, waiver of subrogation in favor of all parties required in Contract Documents.
Other Insurances. Any other insurances should be carrier as required by local, state and federal laws; and by the landlord.
Insurance Carrier. The carrier should have a Minimum rating of "A-" by AM Best.
We may update our required insurance policy from time to time. Franchisee shall be required to comply with Devon Creek updated insurance policy within thirty (30) days of receiving notice.
Currently, there are no purchasing or distribution cooperatives. However, we can require that you make your purchases through a cooperative if one is formed.
Although we do not do so currently, we may in the future negotiate purchase arrangements, including price terms, with designated and approved suppliers on behalf of all franchisees.
Source: Item 8 — RESTRICTIONS ON SOURCES OF PRODUCTS AND SERVICES (FDD pages 21–23)
What This Means (2024 FDD)
According to Devon Creek's 2024 Franchise Disclosure Document, franchisees are required to obtain and maintain various insurance coverages. Devon Creek may regulate the types, amounts, terms, and conditions of this insurance. They also specify standards for underwriters, require Devon Creek to be named as an additional insured, and may require assignment of policy rights. Franchisees must provide periodic verification of coverage, and Devon Creek has the right to obtain insurance at the franchisee's expense if the franchisee fails to do so. Devon Creek also retains the right to defend claims related to insurance. Franchisees are required to comply with Devon Creek's updated insurance policy within 30 days of receiving notice. The insurance carrier should have a minimum rating of "A-" by AM Best.
The required insurance coverages include comprehensive general liability insurance of at least $1,000,000 per occurrence and $2,000,000 in the aggregate, including errors and omissions coverage, personal and advertising injury coverage, and coverage for various liabilities such as bodily injury, property damage, premises, operations, products-completed operations, contractual liability, personal injury, advertising injury, and snow removal where applicable. Additional insurance includes business property insurance in the amount of at least replacement cost, business interruption insurance in the amount of at least twelve months loss of income including coverage for the franchisor's royalty fees and co-insurance requirements, employer liability insurance in the amount of $1,000,000 per occurrence per employee, employment practices insurance in the amount of at least $100,000, and commercial vehicle insurance in the amount of at least a combined single limit for bodily and property damage of at least $1,000,000, or greater if required by state law.
Franchisees must also maintain worker's compensation coverage in the limits required by state law, or if no statutory minimum exists, $500,000 per occurrence. They must also carry any other insurances as required by local, state, and federal laws, and by the landlord. This requirement to maintain specific insurance coverage is standard practice in franchising, as it protects both the franchisee and the franchisor from potential financial losses due to unforeseen events.
Prospective Devon Creek franchisees should carefully review these insurance requirements with an insurance professional to understand the costs and coverage necessary to meet Devon Creek's stipulations. Failing to maintain the required insurance could result in the franchisor obtaining coverage at the franchisee's expense or other penalties as outlined in the Franchise Agreement.