Q: Why should franchisees take out insurance policies?
To cover themselves in the event of a claim or a catastrophic loss. This could cripple the business and they could be financially ruined.
Q: How does it differ from general insurance?
There are different extensions to the cover which are not normally offered to general clients. For example, franchise fees and royalties are automatically included in the Loss of Profits cover.
Q: What are some of the incidents/occurrences they can insure themselves against?
Catastrophes like a fire, the loss of profits as a result of a fire, liability cover, crime classes like money cover, and theft cover in the event of a break-in or an armed hold-up, to name a few.
Q: Are there any incidents that are not covered by the policy?
There are many ‘non-insurable’ events that a conventional franchise product would not cover. That’s why it is important for a client to choose a broker with the skills and track record to do a full needs analysis and insure all the possible losses, highlight any losses that would not be covered and explain why.
Q: Is there a need for additional cover since the introduction of the Consumer Protection Act?
We have developed a broadform liability product to cater for the new CPA that has come into effect.
Q: Why do franchisors need insurance?
It is in the interest of the franchisor to ensure that the franchisee is fully covered and has insurance in place, and to protect the franchisor’s investment in the business venture.
Q: Is it the franchisee’s responsibility when something goes wrong? Or can they call on the franchisor for help?
This would depend on the franchise agreement but in most cases the franchisee is responsible for the insurance cover. The franchisor may suggest a product or a broker it endorses.
Q: How much can a franchisee expect to pay for an insurance policy?
This is difficult to answer as each and every risk is different in many ways.
Q: Are there different options available to suit the different needs of franchises and their budgets?
Absolutely. From only insuring major catastrophic events like a fire to crime classes like money and theft. It would ultimately depend on the assets requiring insurance and the risk management of the client, as well as the full needs analysis done by the broker and insurer’s surveyor.
Q: Can a franchisor offer its franchisees cover as part of the services it provides in return for monthly royalties?
They could as part of the agreement. This could then be endorsed by the franchisor and there would be peace of mind.
Q: What are some of the criteria franchisees should use when determining which insurance providers to choose?
Firstly, obtain a reputable broker with a good track record that is fully licensed to sell and advise on commercial risks. Secondly, get the broker to do a full needs analysis on the business and the risks involved – insurable and non-insurable – and then do a costing in conjunction with a reputable insurer who has a product specifically designed for franchise risks.
Q: Why is it important to choose an insurance policy specifically designed for the franchising industry?
Firstly it is important to ensure that the product fits the client profile, and that the needs of the franchise owner and franchisor are catered for. This would give them peace of mind that the cover is specific and that all the relevant pitfalls are highlighted.