Under what circumstances can the insurance coverage amounts required for an Extreme Art Studio be increased?
Extreme_Art_Studio Franchise · 2024 FDDAnswer from 2024 FDD Document
The insurance company must be authorized to do business in the state where your Extreme Art Studio Business is located and must be approved by us. The liability insurance must cover claims for bodily and personal injury, death, and property damage caused by or occurring in connection with your Extreme Art Studio Business's operation or activities of your personnel in the course of their employment. We reserve the right to require that you obtain all or a portion of your insurance policies from a designated vendor. We or applicable law 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 to reflect inflation, identification of new risks, changes in law or standards of liability, higher damage awards, or other relevant changes in circumstances.
Source: Item 8 — RESTRICTIONS ON SOURCES OF PRODUCTS AND SERVICES (FDD pages 23–26)
What This Means (2024 FDD)
According to Extreme Art Studio's 2024 Franchise Disclosure Document, the franchisor retains the right to increase the required insurance coverage amounts for franchisees. These increases can occur periodically to reflect several factors. These factors include inflation, the identification of new risks, changes in laws or standards of liability, higher damage awards, or other relevant changes in circumstances.
Extreme Art Studio franchisees must maintain specific minimum insurance coverages, including comprehensive general liability insurance with minimum limits of $1,000,000 per occurrence and at least $2,000,000 aggregate. They must also have automobile liability insurance with at least $1,000,000 combined single limit and $1,000,000 general aggregate limit, and product liability insurance with limits of at least $2,000,000 general aggregate. Additionally, franchisees need to carry worker's compensation and employers liability insurance of $500,000/$500,000/$500,000.
This provision allows Extreme Art Studio to adapt to changing economic conditions, legal requirements, and risk landscapes, ensuring that franchisees maintain adequate protection against potential liabilities. For a prospective franchisee, this means that insurance costs could increase over time due to factors beyond their direct control. It is important to factor in potential future increases when budgeting for ongoing operational expenses. Franchisees should discuss with Extreme Art Studio what types of events could trigger an increase in coverage to better anticipate these costs.