Retailing, cleaning, B2B…an insurance scheme is compulsory for every category of business. It must be made to measure, and there are many factors exclusive to the franchising industry to consider when you are setting up franchise insurance. Two particularly important elements are discussed below.
1. Franchisor versus Franchisee
Don’t assume that your franchisor already has insurance to cover you. They may choose to go either route – organise the insurance for you as part of the package, or leave it up to you to cover yourself. Both methods have their benefits and disadvantages. Setting up insurance can be quite daunting for a new franchisee, who to date may only be aware of the UK’s two compulsory insurance types: motor and employer’s liability. The franchisor is more likely to know the insurance needed to operate the business, particularly in industries such as childcare or food franchising that need specialist policies. Machinery or equipment breakdown cover, such as in the manufacturing or agricultural industries, may also be a necessity. Franchisors know how to implement the best practices when it comes to managing risks.
However, there are undeniable advantages when the franchisee controls the insurance. They are likely to be more familiar with the local area in which they are going to trade, and they know the local authorities (city or county or otherwise) with whom they should be checking when it comes to permits. Furthermore, franchisors may not have the time needed to put the correct insurance together for every single franchisee – especially when there are thousands and thousands of them.
Either way, it is essential for franchisees and franchisors to keep well communicated on this topic, anticipating and preparing for drawbacks before they occur.
2. Specialist Insurance Brokers
As franchising is an ever-expanding industry, many insurance brokers – including Hiscox and Moreland recently – are now specialising and providing franchise business insurance programmes. The idea is that they understand you have specific factors to consider, such as: if you are no longer able to work, what will happen to the commitments of the contract with your franchisor that you have left behind? Will it be acceptable to your franchisor if a relative takes over the business?
While you obviously need to research covers yourself, insurance brokers who specialise in franchising are an asset. They will ask questions to gather the information that an insurance underwriter will need to evaluate your system correctly. They should also be able to predict any objections that the same underwriters may make.
While in many cases it is perfectly acceptable to research, buy and claim your franchise insurance in complete isolation, there is no harm in asking for assistance, whether from a franchisor or a specialist insurance broker.