If a Kidokinetics franchisee fails to procure insurance, can the Franchisor procure it on their behalf?
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 on the franchisee's behalf. The franchisee will 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 notification that Kidokinetics has taken this action and of the associated cost.
Kidokinetics requires franchisees to maintain certain 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). Additionally, franchisees with employees must have 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.
It is standard practice in franchising for franchisors to require franchisees to maintain insurance coverage and to reserve the right to procure insurance on the franchisee's behalf if the franchisee fails to do so. This protects both the franchisee and the franchisor from potential liabilities. The 20% administrative fee charged by Kidokinetics is also a fairly typical practice to cover the franchisor's costs and time in arranging the insurance.
A prospective Kidokinetics franchisee should ensure they understand the specific insurance requirements and factor the potential cost of Kidokinetics procuring insurance on their behalf, including the 20% administrative fee, into their financial planning. Maintaining the required insurance is crucial to avoid business interruption and potential financial strain.