The franchise relationship is between two parties – the franchisor and the franchisee. Both of these parties will need very different types of insurance, but there’s no doubt that both parties need coverage. Business insurance is a complex proposition, and the nature of franchises can make it even more complicated. To get the full scoop on franchise insurance, you should talk to an insurance broker in Winnipeg. The exact nature of your business plays a huge role in what kinds of insurance you should get. Nonetheless, we can do a brief overview of the types of insurance franchisees and franchisors typically get:
There are all kinds of different insurance plans to help franchisees. You may want your plan to include:
- Property insurance
- Liability insurance
- Business Interruption insurance
Property insurance is what most people think about when they want insurance. Should your property (be it equipment, your building, your vehicle, or some other form of property) sustain damage due to a covered risk, your policy will pay out. Given that your property may be worth millions in total, property insurance is a must.
Liability insurance comes into play when someone else is harmed by your business operations – this harm might be physical, but emotional harm may be covered, too. That’s because in addition to covering bodily and property harm to another party, liability insurance can cover you for things like slander and libel, as well. Most franchisees purchase Commercial General Liability (CGL) insurance, sometimes simply known as liability insurance.
Workers Compensation insurance is a must – quite literally, for most industries. In Manitoba, you’ll purchase Workers Compensation insurance through the Worker’s Compensation Board.
Finally, many businesses find peace of mind with Business Interruption insurance. Between royalty fees and operating costs, running a franchise can be a costly proposition – especially if you have no customers because you need to close down. Business Interruption insurance (which comes in two forms) is there to ensure you still have a stream of income while repairs are being done (and sometimes after they’re complete).
Franchisors are in need of very different types of insurance – mainly, to protect themselves from franchisees who allege misconduct. The main type of insurance franchisors are interested in is Errors and Omissions (E&O) insurance, sometimes called Franchisor Malpractice insurance. This protects franchisors from errors made in the Franchise Disclosure Document (FDD), from a breach of contract, and other problems in the franchisor/franchisee relationship.
Franchisors will commonly purchase Directors and Officers Liability Insurance, often known simply as D&O. This type of insurance protects directors and officers who might be personally sued for alleged malpractice during their stay at a company. Suits have been levied against executives for everything from falling stock prices to employment practices – D&O can cover you for a lot of different accusations of liability.
There are several other coverages that franchisees and franchisors might purchase, from Employment Practices Liability insurance (EPL) to Cyber insurance. Exactly what types of insurance you might need will depend on your line of business, operations, income, budget, and more.