Pros and Cons of Franchising

Posted on: July 27, 2022 by RMS Hospitality

Franchising is an excellent way for many people to enter business ownership and thrive over a long period. In fact, with over three-quarters of a million franchise businesses across the country, more than 10 percent of all U.S. businesses are franchises. What does that mean for you? It means you must prepare for franchise-owner clients who need general liability insurance and other coverage options for their business. 

What Is a Franchise?

A franchise is a business agreement in which the franchisee obtains the right to use a franchisor’s brand identity and other exclusive business information as they open a location under that business name. Franchise acquisition typically requires a substantial investment and other financial requirements.

What Are Some Franchising Pros?

Some of the benefits for your clients to open a franchise include the support system of an established brand, which means that they already have a regular customer base. The brand identity and recognition reduce the risk of start-up business failure and provide the franchisee with greater security.

For the franchisor, it’s a beneficial agreement because it helps to grow the brand without any increased investment or effort on the part of the brand owner. The brand owner also reaps the benefits of profit percentages from the franchise without managing employee supervision or any operational details.

What Are Some Franchising Cons?

While opening a franchise can benefit the franchisee, it also has drawbacks. Franchise ownership can be costly, with significant investments required to get started. In addition, the strict regulations that come with a franchise can be challenging to adhere to, including restrictions on your hours of operation, your sales, and even the holidays when your business is open. 

For the franchisor, the loss of complete control over the business can be challenging and can come with increased risks. It’s essential to ensure that any franchisors you insure have sufficient general liability insurance to protect them in case of losses from their franchise locations. In addition, the federal and local regulations for opening a franchise can sometimes be complex and challenging to navigate.

When offering the best insurance coverage for the business owners that come to your agency, it’s essential to consider their unique needs, including those of franchisees and franchisors. Sometimes, the client’s property insurance, employer’s policies, and professional liability coverage need careful attention to ensure adequate protection. The right general liability policy makes a significant difference for franchise owners and franchisors. The risks associated with potential legal issues can be considerable, so help your clients protect their financial interests with the proper coverage.

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 (888) 359-8390.

Posted in: Franchise Select Franchising General Liability Insurance

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At RMS and associated firms, business continues as usual. Our staff is remote-capable and available to handle all partners, brokers, and insureds at the present time. Contact us today!