5 Important Insurance Policies for Franchisees

Posted on: February 22, 2018 by RMS Hospitality Group

Owning a franchise is similar to owning any other business, but with some unique benefits and downsides. On the positive side, when buying into a franchise, a lot of the groundwork has already been done, so franchise owners are able to take some of the more difficult tasks associated with opening a business off of their plates right off the bat. On the other hand, franchise owners can sometimes struggle with being pulled in too many directions while trying to meet the needs of their parent company, employees and customers all at the same time. One key way franchise owners can protect their investment is by securing comprehensive insurance coverage. Here are 5 important insurance policies that all franchise owners should carry.

1. General Liability Insurance

General liability insurance, sometimes known as commercial general liability (CGL) is the number one commercial policy for business owners in any industry. In a franchise operation, CGL can protect both the owner and the parent company from claims that may arise when a customer is injured on the premises. Most franchise companies do carry their own general liability master policy but it doesn’t always cover the individual franchise owner, especially in the event that a claim of bodily injury is the result of something that was not a franchise requirement. For example, a cosmetic addition such as a rug causes a customer to trip on their way to the bathroom, and the injured customer files a personal injury claim. Because the rug was added by the franchise owner and not a required piece of equipment or furniture, it may leave the franchise owner solely liable for the damages.

2. Equipment Breakdown Insurance

Adding an equipment breakdown insurance policy helps franchise owners cover any losses that occur due to the mechanical or electrical breakdown of almost any type of equipment, from computers to refrigerators. Some equipment may be covered under the franchise company’s master insurance policy, but even so, franchise owners may sometimes be responsible for paying a deductible. Equipment breakdown insurance can help with that, as well as with covering repair or replacement on the equipment and/or any other property that may have been damaged as the result of an equipment breakdown.

3. Business Interruption Insurance

Business interruption insurance is sometimes called loss of business income insurance, and it covers events beyond the owner’s control that cause a loss of business income such as a structure fire, natural disaster, government shutdown of a building, a vehicle crashing into the building or other freak accidents. This type of insurance helps franchisees pay their fixed expenses while they are recovering or rebuilding.

4. Commercial Auto Liability Insurance

Many franchises utilize commercial vehicle for deliveries, catering, or other general errand. Regardless of what the vehicles are used for, commercial auto liability insurance is essential to protect the franchise owner from liability in the event any accidents or injury occur.

5. Excess Liability Coverage

Excess liability coverage is used as a supplement to a general liability policy and provides additional limits. Since basic policy limits don’t always cover the costs associated with a claim, franchise owners can purchase excess liability coverage for extra protection. However, unlike an umbrella policy, excess liability coverage can only be applied to one specific existing policy, so franchise owners need to be aware of that when choosing to add it to their insurance package.


About RMS Hospitality Group

At RMS Hospitality Group, our expertly crafted policies are written specifically for the hospitality industry. We offer custom tailored solutions to meet any venue’s specific needs. For more information, contact our knowledgeable experts today at (516) 742-8585.

Posted in: blog Franchise Select