What Insurance Cover do Franchise Businesses Need to Consider?

Buying into a franchise can provide training wheels for would-be entrepreneurs who want to run their own business and to be their own bosses, but along with the benefits there are some risks involved.

Franchises are chain businesses that have already established a working model, developed marketing materials and a uniform and predictable product or service. Their commercial offerings range from bakeries to gyms, retail food outlets, professional service providers, hairdressers and transport delivery providers.

The franchise contract may specify what insurance is required and this also depends on the activities involved.

Insurance that helps franchisees manage their risks and protect their business

Fortunately there are insurance policies that provide protection from risks that may arise from a franchise business, brand reputation being one of them. This business insurance cover helps pay expenses associated with maintaining a positive profile if a dissatisfied customer makes a complaint or your computer system is hacked by a cyber criminal, for example.

Public liability insurance is usually specified in the franchising contract, in case a customer is injured or their property is damaged while attending your business. This cover pays for costs involved in damages claims, such as legal fees, investigations and settlements — including agreements made out of court.

This cover may be critical to business operations as it is usually the top of the list of insurances a franchisor requires from franchisees.

Similarly professional indemnity insurance covers you and your employees for expenses involved with alleged malpractice or professional misconduct or any failure of duty in providing a professional service, or if you or one of your staff make a mistake while carrying out business activities that detracts from what your customer has paid for.

It is also a mandatory requirement for some occupations or industry sectors.

As an employer you might face claims related to employment practices such as discrimination, harassment or wrongful dismissal. Management liability insurance can cover legal costs and damages related to employment practices issues.

Having cover for plant and equipment may be a franchise requirement and is a practical consideration in case of fire, flooding, break downs or theft. By extension business interruption insurance helps pay overheads, including wages, and compensation for lost earnings if you're forced to close your business by circumstances outside your control.

Finally cyber risks are prevalent for all businesses and it's critical to highly consider protecting the business from a cyber incident. Cyber criminals may be seeking access to the franchises databases or financial information, or simply targeting your banking details. Cyber insurance assists with remediation, forensic investigation, even ransom negotiation and reputational damage control.

Many insurers offer bundled business insurance, sometimes with the flexibility to add in specialised cover where required, vehicle insurance if you use your car for your business activities, for example.

How a business insurance broker can help protect your franchise

Having an insurance broker help you understand your business risks and the types of cover you need can provide many advantages. This is especially true if you have complex business risks or are in a hard to insure industry.

Some advantages of having a broker help you obtain business insurance cover include:

• resources: an insurance broker has access to a greater choice of insurers than you can find by yourself through online options
• terms: an insurance broker may be able to negotiate for more advantageous terms or scope of cover by leveraging existing relationships with insurers
• comprehensive coverage: an insurance broker may be aware of risks in your operations that you don't realise or may have overlooked
• industry knowledge: an insurance broker who specialises in your industry sector can often bring greater depth of knowledge of the potential risks involved — and the most appropriate insurer for your business.

How Gallagher can help

Working with an insurance broker to understand your business exposures can help you to identify the right insurances to mitigate your risks. Our Gallagher small business specialists can put together a program of insurance cover for your business that protects you when you need it, at claims time.

We have Gallagher brokers nationally across small to large businesses, in all industries, to provide professional expertise.

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