What happens if an Itan franchisee fails to maintain a required insurance policy?
Itan Franchise · 2025 FDDAnswer from 2025 FDD Document
If you fail to maintain a required policy we may, at our option, obtain the policy on your behalf. If we do so, you must promptly sign any application or other form required to obtain the policy and reimburse all premiums and other costs we incur.
- 11.16.Failure to Comply with Standards. You acknowledge the importance of every one of our standards and operating procedures to the reputation and integrity of the System and goodwill associated with the Marks. If we notify you of a breach of our standards or operating procedures (including failure to submit required reports in a timely manner) and you fail to cure within the time period we prescribe, we may (in addition to our other remedies under this Agreement) impose a noncompliance fee of $500 per occurrence. We may impose a separate $500 fee every 48 hours the same noncompliance issue remains uncured after we impose the initial fee. Any noncompliance fees we collect are paid in consideration of us refraining from exercising our contractual right to terminate this Agreement. If you fail to cure a breach before the expiration of the cure period (if any) and we take steps to cure the breach (for example, obtaining required insurance coverage on your behalf or paying amounts you owe to system suppliers), then you must reimburse all costs and expenses we directly or indirectly incur in connection with our efforts to cure the default. Your payment of noncompliance fees and default expense reimbursements does not preclude us from terminating this Agreement in accordance with §20 if the default continues after we collect these amounts.
Source: Item 23 — RECEIPT (FDD pages 44–190)
What This Means (2025 FDD)
According to Itan's 2025 Franchise Disclosure Document, if a franchisee fails to maintain a required insurance policy, Itan has the option to obtain the policy on the franchisee's behalf. If Itan chooses to do so, the franchisee must promptly sign any application or other form required to obtain the policy and reimburse Itan for all premiums and other costs incurred.
Additionally, Itan may impose a noncompliance fee of $500 per occurrence if a franchisee fails to comply with standards or operating procedures, including failure to obtain required insurance coverage. Itan may impose a separate $500 fee every 48 hours the same noncompliance issue remains uncured after the initial fee is imposed. If Itan takes steps to cure the breach, such as obtaining required insurance coverage on the franchisee's behalf, the franchisee must reimburse all costs and expenses Itan incurs.
It is important to note that the franchisee's payment of noncompliance fees and default expense reimbursements does not prevent Itan from terminating the Franchise Agreement if the default continues after these amounts are collected. This highlights the importance of maintaining the required insurance coverage to avoid potential financial penalties and the risk of franchise termination. The insurance policies franchisees obtain must be from licensed insurance carriers rated A or better by AM Best and satisfy all requirements in the Manual. Each policy must name Itan and its owners, officers, and directors as additional insureds, waive all subrogation rights against Itan, and provide Itan with at least 30 days' prior written notice of termination, expiration, cancellation, or modification of the policy.