If the Gold Star Company procures insurance for a franchisee, what are the franchisee's obligations?
Gold_Star Franchise · 2025 FDDAnswer from 2025 FDD Document
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, franchisees are obligated to reimburse Gold Star for the costs and premiums of insurance if the franchisee fails to maintain the required insurance coverage. This reimbursement includes interest on those costs from the date they were incurred by Gold Star, calculated at the rate specified in Section 8.3 of the franchise agreement.
This means that if a Gold Star franchisee neglects to obtain or keep their insurance up to date, Gold Star has the option, but not the obligation, to secure the necessary insurance coverage themselves. Should Gold Star choose to do so, the franchisee is then responsible for paying back the full cost of the insurance premiums, plus interest, to Gold Star. This provision ensures that the franchise location remains insured, protecting both the franchisee and Gold Star from potential financial losses due to unforeseen events.
For a prospective Gold Star franchisee, this underscores the importance of maintaining continuous and adequate insurance coverage as mandated by the franchise agreement. Failure to do so not only exposes the franchisee to potential liabilities but also places them at risk of incurring additional expenses in the form of reimbursement to Gold Star, along with interest charges. Therefore, franchisees should prioritize insurance compliance to avoid these financial burdens and maintain a healthy business relationship with Gold Star.