Once a business reaches franchise status, it typically has brand recognition and high long-term economic prospects. However, this doesn’t mean franchises are impervious to risk. If you own a franchise, it’s critical that you purchase insurance in order to protect your organization against the primary risks it faces. Here is a close look at this subject.
What Is A Franchise?
Let’s begin by defining the term “franchise.” A franchise is any business whose owner decides to license its operations and products or services to entities called franchisors in exchange for a fee.
Franchises can belong to many different industries, including restaurant, hospitality, retail, and entertainment, and they generally have multiple locations across the country. Startup costs for most franchises often amount to at least a few thousand dollars.
Why Is Business Insurance Important For Franchise Owners?
It’s important for franchise owners to have insurance because franchises can experience many different liability-related issues with clients and franchisors. Here are some examples of the types of coverages you should acquire if you own a franchise.
General Liability Coverage
This coverage will help you in the event that someone becomes injured on your property. For example, a customer could slip and fall at the entrance to your hotel if the floor is wet. General liability coverage can help pay for the associated medical expenses and legal fees. Both you and your parent company can be protected against personal injury claims.
Commercial Auto Liability Coverage
Many franchises use vehicles such as cars, vans, and trucks to make deliveries, transport passengers, or meet with clients or prospective partners. This coverage can help pay for the cost to repair or replace a vehicle following an accident.
Workers’ Compensation Insurance
Employees injuries can occur in almost any industry. Workers’ comp covers you after an employee suffers an injury or an illness on the job due to unsafe workplace conditions. Be sure to look up the laws regarding workers’ comp in your state, as these can often vary.
Business Interruption Insurance
Business interruption insurance is beneficial when events such as fires, natural disasters, and pandemics force your franchise to shutter. This coverage will pay for fixed expenses such as rent during the reconstruction period.
Equipment Breakdown Insurance
Sometimes, equipment such as printers and refrigerators malfunction due to mechanical or electrical issues. This coverage can cover the cost to replace or repair such items. Be sure to check your policy’s details, as malfunctions resulting from certain events like floods are typically not covered by breakdown insurance.
Other Key Coverages Specific to Franchises by Industry
Here are some of the more unique business insurance coverages your franchise may need if it belongs to any of the following industries:
Restaurants and other businesses that sell food can benefit from acquiring:
- Food contamination coverage for when your products become contaminated by bacteria and lead to diseases like E. coli;
- Temperature change coverage if your refrigerators break down and your food becomes spoiled; and
- Liquor liability coverage to cover claims involving liquor sales.
Landscaping franchise owners should consider acquiring business income extension for off-premises operations. This insurance can help you recoup any income lost due to equipment damages. Pesticide and herbicide insurance can also be highly beneficial.
Retail businesses can obtain business income from dependent properties coverage. This type of insurance covers you should a third-party business that your organization relies on causes you to lose income.
Other key coverages for franchises include employment practices liability insurance (EPLI) and cyber liability insurance. Be sure to speak with an experienced insurance professional to determine which policy is the best fit for you given your business’s primary needs and risks.
Speak To The Franchise Insurance Experts
Reach out to the professionals at John M. Glover Insurance Agency to learn more about franchise insurance and its benefits. Since 1916, we’ve been dedicated to providing high-quality insurance solutions to clients throughout Connecticut, New Jersey, New York, Hawaii, and Massachusetts. As an independent agency, we work closely with many well-known and reliable insurance firms.
If you own a franchise, it can be extremely helpful to have business insurance. Our policies include coverages like general liability, commercial auto liability, workers’ compensation, property insurance, equipment breakdown, and business interruption. At JMG, we understand the many risks and challenges that come with launching a franchise and are prepared to protect you from these liabilities. If you need excess coverage, we can provide that as well.