What happens to the insurance policies related to Potbelly Sandwich Works?
Potbelly_Sandwich_Works Franchise · 2025 FDDAnswer from 2025 FDD Document
stations, all in accordance with the Franchise Documents.
Section 6.09 Insurance. Prior to the Closing Date, Purchaser shall procure and maintain in full force and effect in accordance with the terms and conditions of the Franchise Documents, at Purchaser's expense, the following insurance policy or policies in connection with the Shops, or as required by your state, city or municipality by reason of the construction, operation or occupancy of the Shops. Such policy or policies shall be satisfactory to Seller and obtained from reputable insurers having an A.M. Best rating of A-VII or better, and the coverage terms must be as good or better than what is commonly purchased by restaurant owners in your area. Coverage shall include, at a minimum, the following:
(a) Commercial general liability insurance of $1 million per occurrence and $2 million in the aggregate, including $300,000 in coverage for fire legal liability. Coverage must be primary and non-contributory to any other coverage Seller has, provide waiver of subrogation and there should be at least $1 million for personal and advertising injury;
- (b) Automobile liability insurance of $1 million covering bodily injury and property damage for all owned, non-owned, and hired vehicles;
- (c) Umbrella liability insurance of at least $2 million per occurrence;
- (d) Employment practices liability of at least $500,000, including third-party liability and endorsement naming Seller as co-defendant;
- (e) Statutory workers' compensation insurance the law requires, including employer's liability for at least $1 million;
- (f) Property insurance for the replacement cost of your leasehold improvements, equipment, and business personal property;
- (g) Business income and extra expense coverage for not less than 6 months of sales;
- (h) Employee dishonesty insurance of at least $25,000 and any other insurance required by your lender or landlord; and
- (i) Cyber-security insurance of at least $1 million limit and PCI Fines and Penalties sub-limit of $500,000.
Purchaser shall provide to Seller at the Closing one or more certificates (the "Insurance Certificate") evidencing the insurance specified in this Section 6.09 and naming Seller and each of its Affiliates, directors, agents, and employees (as may be specified by Seller) as additional insureds and, in the case of property insurance, such parties shall be named as their interest may appear. All Insurance Certificates shall expressly provide that no less than thirty (30) days' prior written notice shall be given to Seller in the event of material alteration to, or cancellation of, or non-renewal
Source: Item 23 — RECEIPTS (FDD pages 79–355)
What This Means (2025 FDD)
According to Potbelly Sandwich Works's 2025 Franchise Disclosure Document, prior to the closing date of an asset purchase agreement, the purchaser (franchisee) is required to secure and maintain specific insurance policies in full force and effect, adhering to the terms and conditions outlined in the Franchise Documents. These policies, obtained at the franchisee's expense, must be satisfactory to Potbelly Sandwich Works and sourced from reputable insurers with an A.M. Best rating of A-VII or better. The coverage terms must be as good or better than what is commonly purchased by restaurant owners in the franchisee's area.
The required insurance coverage includes commercial general liability insurance of $1 million per occurrence and $2 million in the aggregate, including $300,000 in coverage for fire legal liability. It also includes automobile liability insurance of $1 million, umbrella liability insurance of at least $2 million per occurrence, employment practices liability of at least $500,000, statutory workers' compensation insurance, property insurance for the replacement cost of leasehold improvements, equipment, and business personal property, business income and extra expense coverage for not less than 6 months of sales, employee dishonesty insurance of at least $25,000, and cyber-security insurance of at least $1 million limit and PCI Fines and Penalties sub-limit of $500,000.
Furthermore, the purchaser must provide Potbelly Sandwich Works with an Insurance Certificate evidencing the required insurance, naming Potbelly Sandwich Works and its affiliates, directors, agents, and employees as additional insureds. In the case of property insurance, these parties must be named as their interest may appear. The Insurance Certificates must expressly state that Potbelly Sandwich Works will receive no less than thirty (30) days' prior written notice in the event of any material alteration, cancellation, or non-renewal of the insurance coverages.