Is failure to obtain and maintain the required insurance a material breach of the Fitstop franchise agreement?
Fitstop Franchise · 2024 FDDAnswer from 2024 FDD Document
If you fail to obtain insurance and keep the same in full force and effect, we may obtain this insurance at our discretion, and you will pay us the premium costs upon our demand. Failure to obtain and maintain the required insurance constitutes a material breach of the franchise agreement entitling us to terminate the agreement. You must also procure and pay for all other insurance required by state or federal law. We may periodically increase the amount of coverage required and/or require different or additional coverage. We do not derive revenue as a result of your purchase of insurance.
Source: Item 8 — RESTRICTIONS ON SOURCES OF PRODUCTS AND SERVICES (FDD pages 19–23)
What This Means (2024 FDD)
According to Fitstop's 2024 Franchise Disclosure Document, failure to obtain and maintain the required insurance is indeed a material breach of the franchise agreement. This gives Fitstop the right to terminate the agreement. Fitstop also has the option to obtain the insurance themselves, and the franchisee would be responsible for paying the premium costs upon demand.
Fitstop requires franchisees to acquire and maintain minimum insurance policies throughout the entire term of the franchise. These minimums may be adjusted periodically in Fitstop's manuals or through prior written notice. The franchisee is responsible for the expense of these insurance policies, which must be paid in advance.
Fitstop requires that these insurance policies cover both the franchisee and Fitstop, including their officers, directors, and nominees, as additional insureds. The policies must protect against any liability arising from the ownership, maintenance, or operation of the franchise business. Furthermore, Fitstop must receive a 30-day written notice of any cancellation, modification, or termination of these policies. Franchisees must provide Fitstop with original or duplicate copies of all insurance policies, certificates of insurance, or other acceptable proof of insurance, along with proof of payment, within 30 days of issuance.
It is important for prospective Fitstop franchisees to understand these insurance requirements and ensure they can comply. Franchisees should also independently determine if the minimum coverage amounts are sufficient for their specific circumstances, as Fitstop states that the listed coverage requirements are only minimums. Failure to meet these requirements could lead to termination of the franchise agreement.