Franchise insurance is critical for both franchisors and franchisees to protect the franchise system and manage compliance. Unfortunately, a franchise system has many unique challenges and often requires multiple types of insurance policies for both parties. Read on to learn about franchise insurance.


Typical Coverage for Franchisors

As a franchisor, you face industry risks, as well as risks from the franchise system itself. Coverage usually recommended for franchisors include:

  • Franchisor Errors & Omissions (E&O) Liability – Protects franchisor executives and the franchise system from litigation brought by franchisees, when their expectations fall short.
  • Management (D&O) Liability – Covers executives and board members from litigation brought by customers, franchisees and investors from claims of mismanagement or breach of fiduciary duties.
  • Employment Practices (EPL) Liability – Defends claims stemming from the employment process, such as discrimination, sexual harassment or wrongful termination.

Typical Coverage for Franchisees

The needs of franchisees vary, depending on the type of business. However, most franchisees have specific insurance requirements, including:

  • General Liability – Protection from third party claims alleging damages for incidents such as bodily injury, personal injury or property damage.
  • Property Liability – Offers protection of your building, its contents and employees.
  • Commercial Auto (Hired and Non-Owned) – Coverage for vehicles in the event they incur physical damage, cause physical damage or bodily injury to others.
  • Umbrella Liability – Offers additional coverage beyond primary policy limits.
  • Workers’ Compensation – Ensures employees that suffer job-related injuries receive the care they need.
  • Professional Liability – Covers the cost of certain legal fees that your franchise may face as a result of claims and lawsuits against them based on the advice or services they provide.

Additional coverage that might be beneficial to franchisees may include:

  • Cyber Liability – Provides coverage against costs that can accrue as a result of theft or breach of client/customer data.
  • EPLI – Offers protection from claims associated with the employment process, including discrimination and wrongful termination.
  • Product Liability – Protects your business from claims related to the manufacture or sale of products and food to the public.
  • Business Interruption – Coverage for loss of earnings when your franchise is closed due to a covered peril.

Franchise Insurance to Fit Your Needs

At Lockton Affinity, we know that franchise systems require unique coverage, and we have the experience to meet your needs. We work with more than 50 franchise brands that represent more than 47,000 franchise locations in the United States.

We’ve developed a risk management system specifically for franchisors. This system allows us to deliver customized insurance programs with integrated risk management solutions that fundamentally reduce the cost of risk for your entire system.

This unique approach is founded on proprietary six principles of franchise risk management and involves our analysis of your product and service offering, benchmarking and ongoing reviews of insurance requirements and the creation of unique solutions for both your headquarters and franchise locations.

We have the expertise to deliver proven results and can manage compliance to ensure you can reduce redundant insurance charges and lower insurance premiums for your entire system.