If you own any type of franchise, you know that running such a business is often a challenging endeavor that should be pursued carefully. Additionally, you may have wondered at one point whether you need insurance to protect your franchise and yourself from certain risks and liabilities. Here is a close look at this subject.
What Is A Franchise?
First, it’s important to define exactly what a franchise is: a franchise is any business whose owner decides to license its operations — as well as its branding and products or services — to other entities and receives a fee called a “franchise fee” in return. The primary goal of a franchise is typically to expand geographical reach or increase market share for a relatively low cost. According to the International Franchise Association, the royalty fees that franchisors are paid vary depending on the industry, although they normally fall between 4.6% and 12.5%. In the United States, it’s state governments that dictate regulations for franchises.
Do You Need Insurance For A Franchise?
The simple answer to this question is “yes:” it’s essential for any type of franchise (restaurant, hotel, bowling alley, etc.) to carry an insurance policy that can shield it from claims that may arise from your employees, franchisors, or clients.
Types Of Franchise Insurance Policies
There are five key insurance policies all franchise owners should have:
General Liability Insurance
This is perhaps the most important type of coverage to have as a franchisee. General liability insurance protects you from claims resulting from onsite client injuries, such as slip-and-fall incidents at or near the entrance to your property. It can often be difficult to keep track of every individual who enters your business, but liability coverage can help alleviate the burden of having to pay for such claims. Most such policies will also cover medical expenses and any associated legal fees.
Workers’ Compensation
No matter what industry your franchise is in, workers’ compensation coverage can be extremely beneficial. This type of policy helps pay lost wages and medical benefits to any employee who becomes injured or falls ill while performing their duties. The exact requirements for workers’ comp vary by state, so be sure to look these up. Also, keep in mind that you can avoid facing workers’ compensation claims by ensuring your franchise’s working conditions are safe.
Commercial Auto Liability Insurance
Once your franchise starts to grow, it’s likely you’ll have to use more vehicles for your routine operations. Therefore, be sure to acquire commercial auto liability coverage. This type of policy can normally cover damages and injuries involving cars, trucks, and vans your business owns or borrows to complete deliveries or transport passengers. Depending on your chosen policy, damages to third-party properties (such as a client’s warehouse) may or may not be covered.
Equipment Breakdown Coverage
Sometimes, business equipment such as computers, incinerators, and refrigerators can malfunction unexpectedly. An equipment breakdown policy can pay for losses that follow an electrical or mechanical breakdown. Many equipment breakdown policies also cover the cost to repair or replace any items damaged due to the malfunction. Keep in mind that equipment failures caused by natural disasters are generally not covered by equipment breakdown insurance. For this coverage, you will need to buy another specialized policy.
Food Contamination Insurance
If your franchise serves or sells food products, this is a critical coverage to have. During the processes of preparing, serving, and storing food, diseases such as salmonella and E. coli can easily arise if the proper precautions aren’t taken. A food contamination insurance policy can cover the cost to replace any contaminated products, loss of income resulting from a shutdown of your business, the medical exams for any workers impacted, and the ensuing cleaning of your facility.
Other key insurance coverages for franchises include loss of income insurance and employment practices liability insurance. If you ultimately find that your limits are too low, you can also acquire excess liability coverage.
Retail Insurance
Franchise owners operating in the retail environment face distinct risks that require adequate insurance coverage. Retail insurance can protect them against unexpected events like property damage, theft, and liability claims, which are particularly relevant in high-traffic retail settings. This coverage not only safeguards the business’s physical assets but also covers loss of income due to business interruptions.
Retail insurance provides liability protection against lawsuits or claims that could be financially disastrous. For franchise owners, who must comply with the standards and expectations of a larger network, maintaining comprehensive insurance is crucial for their financial stability and compliance. It allows them to focus on growth and customer satisfaction, free from the threat of potential setbacks.
Speak To The Franchise Insurance Experts
Contact the experts at John M. Glover Insurance Agency to learn more about insurance for franchises. We have been committed to acting as one-on-one advocates for each of our clients, regardless of their needs and budget, since our founding in 1916. As an independent agency, we work closely with several well-established insurance firms.
If you own any type of franchise, it’s imperative that you acquire insurance. Our policies include coverages such as general liability, equipment breakdown, commercial auto liability, property insurance, and workers’ comp. At JMG, we understand the many risks associated with owning a franchise and will strive to help you combat them.
Call JMG today or visit us online for more information.
