If a Kidokinetics franchisee fails to maintain required insurance, what right does the Franchisor have?
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 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 for obtaining the insurance. The franchisee is required to pay Kidokinetics immediately upon notification 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 of at least $100,000 combined single limit. Additionally, franchisees must carry statutory worker's compensation insurance, hired/non-owned automobile insurance, crime insurance for employee dishonesty ($5,000 combined single limit), 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 clause in the franchise agreement protects Kidokinetics from potential liabilities arising from the franchisee's operations. By allowing Kidokinetics to procure insurance on behalf of a non-compliant franchisee, the system maintains continuous coverage, safeguarding both the franchisee and the franchisor. The additional 20% charge serves as a deterrent and compensates Kidokinetics for the administrative burden of ensuring compliance. Franchisees should ensure they understand the insurance requirements and maintain adequate coverage to avoid these additional costs and potential disruptions to their business operations.
It is also important to note that Kidokinetics reserves the right to increase the required minimum requirements for any type of insurance or add additional types of insurance requirements as Kidokinetics deems reasonably prudent to require. Franchisees are given 30 days to submit proof of coverage pursuant to Kidokinetics's requirements.