What happens if a Kidokinetics franchisee fails to maintain the required insurance?
Kidokinetics Franchise · 2024 FDDAnswer from 2024 FDD Document
- 14.3. Failure to Procure.
If, for any reason, Franchisee should fail to procure or maintain the insurance required by this Agreement as revised from time to time for all franchisees by the Franchise Operations Manual or otherwise in writing, Franchisor will have the right and authority (without, however, any obligation) to immediately procure such insurance and to charge Franchisee for the cost of the insurance plus twenty percent (20%) of the premium for an administrative cost of obtaining the insurance.
Franchisee shall pay Franchisor immediately upon notice by Franchisor to Franchisee that Franchisor has undertaken such action and the cost.
Source: Item 22 — CONTRACTS (FDD page 59)
What This Means (2024 FDD)
According to Kidokinetics's 2024 Franchise Disclosure Document, if a franchisee fails to procure or maintain the required insurance, Kidokinetics has the right, but not the obligation, to procure the insurance themselves. The franchisee will then be charged for the cost of the insurance, plus an additional 20% of the premium to cover Kidokinetics's administrative costs. The franchisee is required to pay Kidokinetics immediately upon receiving notice of this action and the associated costs.
Kidokinetics requires franchisees to obtain and maintain specific insurance policies, including comprehensive general liability insurance of at least $1,000,000 per occurrence and $2,000,000 in the aggregate (or as required by lease or state laws if leasing commercial space), umbrella excess liability coverage of $1,000,000, and automobile insurance with a combined single limit of $100,000 (or more, if required by state law). If the franchisee has employees, they must also maintain statutory worker's compensation insurance, hired/non-owned automobile insurance, crime insurance for employee dishonesty of $5,000, sexual abuse and molestation coverage, an accident policy, and workers compensation with $1,000,000 limits or such additional limits as required by state law.
This requirement ensures that both the franchisee and Kidokinetics are protected from potential liabilities and financial losses. The franchisor's ability to procure insurance on behalf of the franchisee provides a safety net, ensuring continuous coverage and minimizing disruptions to the business. However, the additional 20% administrative fee means it is significantly more cost-effective for the franchisee to maintain their own insurance coverage. Furthermore, failure to maintain required insurance coverage can be grounds for termination of the franchise agreement.