Is the Gold Star company obligated to procure insurance if the franchisee fails to do so?
Gold_Star Franchise · 2025 FDDAnswer from 2025 FDD Document
- 18.5 Failure to Maintain Insurance. If FRANCHISEE fails to procure or maintain insurance as herein required, the COMPANY may at its option (but shall not be obligated to), in addition to its other rights and remedies hereunder, procure such insurance and, in such event, FRANCHISEE shall, upon demand from time to time, reimburse the COMPANY for the costs and premiums thereof together with interest thereon from the date such costs are incurred by COMPANY at the rate specified in Section 8.3, above.
Source: Item 23 — Receipts (FDD pages 53–163)
What This Means (2025 FDD)
According to Gold Star's 2025 Franchise Disclosure Document, while franchisees are required to maintain insurance, Gold Star is not obligated to procure insurance if the franchisee fails to do so. However, Gold Star has the option to procure insurance if the franchisee fails to maintain the required insurance.
Specifically, if a Gold Star franchisee fails to procure or maintain the required insurance, Gold Star has the option to procure such insurance. If Gold Star exercises this option, the franchisee is required to reimburse Gold Star for the costs and premiums of the insurance, along with interest from the date the costs were incurred. The interest rate is specified in Section 8.3 of the franchise agreement.
This clause protects Gold Star from potential liabilities arising from the operation of the franchise by ensuring that adequate insurance coverage is in place. While Gold Star is not obligated to obtain insurance on behalf of a non-compliant franchisee, this provision allows them to do so and recover the costs, ensuring continuous coverage and protecting their interests. This is a common practice in franchising, where franchisors often reserve the right to ensure compliance with essential requirements like insurance coverage to protect the brand and the network.