What are the risks of starting a franchise?
- 1. Product risk. Decide what you are selling. ...
- 2. Market risk. Knowing your customer and why, how and where they buy related products is arguably the most important risk factor to assess before launching your product. ...
- 4. Team risk. There is no way that one person can vanquish every risk. ...
- 5. Execution risk. ...
What does it cost to franchise a business?
Franchise costs include the purchase of equipment and the start-up costs. You typically spend $18,500-$8500 to franchise your business. It depends on your franchise team, the industry you are in, and the level of support you need to decide what amount of costs you will incur.
What does buying a franchise mean?
Buying a franchise means buying into the opportunity to participate in the brand. This upfront cost is in addition to any of the expenses associated with starting a business, such as purchasing a location, setting up contracts with suppliers, obtaining permits and insurance, hiring a staff, and so on. You have to pay to play.
What is the purpose of franchise?
- To protect the franchised brand by operating the franchise in strict compliance with system operating standards.
- To build a strong and loyal customer base by offering only approved products and services and by providing superior customer service.
- To ensure that all employees are properly trained, and the franchise is properly staffed at all times.
Do franchises need their own insurance?
Although valuable, there are certain measures you must take on your own to protect yourself in case of certain events, such as inventory loss or customer injury on your property. This requires that you insure your franchise.
How are franchises insured?
A franchise cover is a reinsurance plan whereby the claims from several policies are aggregated to form a reinsurance claim. Franchise covers are also known as loss trigger covers. Other types of non-proportional reinsurance with aggregate covers are aggregate stop-loss reinsurance and catastrophe covers.
What is included when you buy a franchise?
Essentially, a franchisee pays an initial fee and ongoing royalties to a franchisor. In return, the franchisee gains the use of a trademark, ongoing support from the franchisor, and the right to use the franchisor's system of doing business and sell its products or services.
What benefits do franchise owners get?
Franchisees purchase brand rights from a franchisor, giving them access to benefits like: The ability to be your own boss — no experience necessary. Already-established business practices and built-in assistance. Instant brand recognition with a customer base.
What type of insurance does a franchisor need?
Most franchise agreements require a franchiser to maintain at least a few million dollars of “general liability insurance.” General liability insurance covers such perils as property damage, personal injury, advertising injury and products liability.
What is franchise life insurance?
Franchise (or Wholesale) Life Insurance is a form of personal coverage issued under individual policies to a group under conditions which are similar to Group Insurance but which do not necessarily qualify under the Group Insurance definition. a) Identity of Insureds.
How do franchise owners get paid?
How do franchise owners get paid? Franchise owners can pay themselves a salary or depending on their business entity, they may be able to take a draw from their accumulated equity.
Is it worth buying into a franchise?
If you're a fledgling entrepreneur or a seasoned business person wanting to diversify your holdings, you've probably wondered, “Are franchises a good investment?” The simple answer is yes, especially if a great opportunity presents itself. There is an obvious appeal to starting a business via buying a franchise.
What are some of the drawbacks of owning a franchise?
Disadvantages of FranchisingLimited creative opportunities. ... Financial information is shared with the franchisor. ... Varied levels of support. ... Initial investments and start-up costs can be expensive. ... Contracts aren't permanent. ... You're your own boss, but you have less individual control.
Who is liable in a franchise?
Franchises offer limited liability for the franchisee from any legal suits brought by customers or employees. This means that the franchise owner's personal assets cannot be affected by the outstanding debts of the franchise.
Is it better to own or franchise?
Success Rates for Franchises vs. Bottom line, franchises have a higher overall success rate than startups. Franchises operate under a predetermined business model that has already brought success while independent businesses make adjustments and decisions to their business model as they go.
What are the 3 conditions of a franchise agreement?
Franchise agreements vary between different franchises, but these seven areas should be addressed in every franchise agreement.Use of Trademarks.Location of the Franchise.Term of the Franchise.Franchisee's Fees and Other Payments.Obligations and Duties of the Franchisor.Restriction on Goods and Services Offered.More items...
How do insurance franchise owners make money?
The primary way an insurance broker makes money is from commissions and fees earned on sold policies. These commissions are typically a percentage of the policy's total annual premium. An insurance premium is the amount of money an individual or business pays for an insurance policy.
How do insurance franchises make money?
Most insurance companies generate revenue in two ways: Charging premiums in exchange for insurance coverage, then reinvesting those premiums into other interest-generating assets. Like all private businesses, insurance companies try to market effectively and minimize administrative costs.
What is a credit insurance policy?
This insurance policy pays all or a portion (i.e. monthly payment) of the outstanding debt if an event that is named in the policy occurs (i.e. death, disability or involuntary unemployment of the insured). The insurance company usually pays the money directly to the creditor or lender. Types of Credit Insurance.
What is group paid up insurance?
Group paid-up plans combine term life insurance (paid by the employer) and whole life (paid by the employee). The death benefit is a total of the two plans. At retirement or termination the employee is entitled to the cash value (paid-up) policy.
Franchise Insurance: What Kind Do You Need?
Depending on whether you are a franchisor or a franchisee, there are different types of insurance to consider. The franchise insurance you need als...
What Should Franchisors Consider?
Firstly, franchisors should ensure they have franchise insurance policies in place. This will help protect the business in case of unforeseen circu...
What is a Franchise Insurance Plan?
A best practice for franchisors is to outline what coverage you need depending on your business activities in the franchise contracts. These contra...
What Types of Franchise Insurance Does a Franchisor Need?
Now that you understand what you need to look for in your insurance plan, we will define the required insurance for franchises.
What is a Franchise Insurance Plan?
The best franchisors insurance considerations are to outline what coverage you need depending on your business activities in the franchise contracts. These contracts are also known as Franchise Disclosure Documents (FDD).
Why do franchisors need insurance?
Franchisors need to make sure they have insurance policies in place to protect the business from unforeseen circumstances within each franchise location. Policies that protect franchisors include: Franchisors need to outline what insurance is necessary for franchises depending on their business activities in their Franchise Disclosure Document ...
What is product liability insurance?
With product liability insurance, franchisors can assure their business has protection from claims made suggesting their products inflected injury or property damage.
Do franchises need commercial car insurance?
If vehicles are part of a franchise’s operations, commercial car insurance needs to be part of the policy.
Why is franchise insurance important?
Importance of Franchise Insurance. When a person agrees to run a franchise, they assume certain responsibilities. All business activities run the risk of affecting employees, customers and stakeholders either in a positive or negative way. Acquiring business insurance protects franchise owners from many of the consequences of operating a business.
What type of insurance should franchise owners carry?
Examples of the types of insurance policies that all franchise owners should carry to protect their business and its employees include : General Liability Insurance – Also known as commercial general liability, general liability insurance is one of the most sought-after commercial policies for business owners in all industries.
What is commercial auto insurance?
Commercial auto liability insurance can help cover the cost of an auto repair or replacement in the event of a covered vehicle accident. Excess Liability Coverage – Many franchises invest in excess liability coverage to supplement their other underlying liability insurance policies.
What is business interruption insurance?
Business interruption insurance helps cover fixed expenses during the rebuild. Equipment Breakdown Insurance – An equipment breakdown insurance policy can help cover any losses caused by any electrical or mechanical breakdown of business equipment, such as refrigerators or computers.
Is franchise insurance the same as running a business?
Running a franchise is similar to running any business but with some distinct differences. In many cases, the groundwork has already been laid allowing franchise owners to focus on other core business activities. Examples of the types of insurance policies that all franchise owners should carry to protect their business and its employees include :
Does Workers Comp cover injuries?
Workers Comp Insurance – No matter the franchise, injuries can always happen. Even with company safety protocols, there is still a risk for any employee. Workers compensation insurance covers on-the-job bodily accidents and any diseases or lasting medical problems caused by employment conditions.
What are the benefits of franchise ownership?
One of the benefits of franchise ownership is that you have the backing of an established corporation to guide you in your journey. Although valuable, there are certain measures you must take on your own to protect yourself in case of certain events, such as inventory loss or customer injury on your property . This requires that you insure your franchise.
What happens if you hire employees to work in a franchise?
If you hire any employees to work in your franchise, you needto protect yourself from any claims an employee might file. This can include claims such as wrongful dismissal or any type of harassment in the workplace.
Do delivery trucks need insurance?
If you have delivery trucks or use your vehicle for your business, it’s important to protect it while it’s on the road. You should have auto insurance coverage for all of the motor vehicles used to do business on a regular basis.
Do you need public liability insurance for a restaurant?
If you’ll welcome customers or clients into a store or onto your premises, such as you would with most restaurant franchises, you must have public liability insurance. This coverage protects against slip and fall accidents, or any other event that could cause bodily injury or property damage.
What else should new franchisees know about insurance?
Insurance, like many consumer products, is a cost of doing business in which “you get what you pay for.”
What should a franchisee do?
They should also be confident in the insurance agent with whom they work, expect support as needed , reviews of coverage annually , and see the agent active within the franchise…even participating in annual meetings and conventions.
Why do franchisees evaluate policies solely on price?
A new franchisee might evaluate policies solely on price because of the other spend involved in getting open as opposed to working with an experienced agent who knows the associated industry risks. Even if the FDD of the franchisor is written correctly, making sure franchisees have independent coverage in place protects the brand and the franchisee at the same time.
What happens if a franchisee has a fire?
If a franchisee has a fire, is under-insured and cannot repair or rebuild, ultimately the franchisor and brand can be damaged. This is why brands should use a third party insurance compliance company to verify, verify, verify.
What does an independent agent do?
An independent agent will make sure policies are shopped across the market and not just one market. Rates can vary dramatically, so the agent needs to be familiar with your business. If the business is extremely risky or unusual regarding liability or property damage issues, a good agent will guide you through surplus markets. This is where an agent will advocate for you by helping you understand your special risk and the wording of your particular circumstances and needs.
What is the responsibility of a business?
First and foremost a business is supposed to do the right thing and be socially responsible for its actions. This responsibility extends to not only the customers the business serves, but to the employees who do the work.
Do franchisees need umbrella insurance?
New franchisees need to avoid under-insuring exposures. We most often see cases in which liability coverage has limits that do not protect the franchisee's personal net worth, or new franchisees not purchasing umbrella insurance to extend limits and coverage.
Is health insurance a consideration when starting a business?
As an entrepreneur myself, I know health insurance is a major consideration when people decide to start their own businesses. And sadly, the lack of affordable insurance keeps many from ever taking the leap. In today’s economy, there are already enough hurdles for people who want to become franchisees. Worrying about health insurance for themselves and their families shouldn’t have to be one of them. I hope more franchisors and insurers follow the lead of Allegra and Blue Cross Blue Shield.
Do franchisees have health insurance?
Health insurance coverage is a touchy issue for business owners, and franchisees are no exception. Very few franchisors offer insurance coverage for their franchisees. And since insurers classify franchisees as separate from the parent company, they can’t even take advantage of group rates for coverage. However, BlueMauMau, a website covering ...
What is an applicable large employer (ALE)?
An ALE is any company that has at least 50 FTEs. According to the ACA, an FTE is someone who works at least 30 hours a week, or 130 hours of service per month.
Calculating full-time and part-time employees
To determine whether your organization is an ALE, you must include all FTEs, plus the full-time equivalent of your part-time employees.
Small business health insurance requirements
The ACA stipulates that small businesses with fewer than 50 employees are not required to offer health insurance benefits to their employees or pay a tax penalty. However, that doesn’t mean they shouldn’t provide health insurance benefits.
Insurance options for employees of small businesses
Currently, there is no penalty for individuals who don’t have insurance. However, if you’re an employer that is not an ALE and isn’t offering health insurance, your employees have the option of getting their own individual health insurance policy.
Conclusion
For small business employers, it can be challenging to keep up with the rules and regulations of health insurance. While companies with 50+ employees need to offer qualified health coverage or potentially face a penalty, other smaller companies aren’t compelled to do so.
Public Liability
- If you’ll welcome customers or clients into a store or onto your premises, such as you would with most restaurant franchises, you must have public liability insurance. This coverage protects against slip and fall accidents, or any other event that could cause bodily injury or property damage. You might also need public liability insurance if you me...
Workers Safety
- Your employees might not be covered under the public liability insurance. In this case, you will need separate insurance to protect your staff while they’re at work.
Product Liability
- If you have any type of inventory for your business, it’s a good idea to insure it against any loss or damage. This is especially true if damaged goods could cause you to close your doors until new inventory or equipment arrives.
Property Damage
- If you invest in a property for your franchise, you’ll need to ensure the building where your business is housed stays in proper working order. Property damage insurance protects you in case of flood, fire, smoke, vandalism, and more.
Employment Practices
- If you hire any employees to work in your franchise, you needto protect yourself from any claims an employee might file. This can include claims such as wrongful dismissal or any type of harassment in the workplace.
Auto Insurance
- If you have delivery trucks or use your vehicle for your business, it’s important to protect it while it’s on the road. You should have auto insurance coverage for all of the motor vehicles used to do business on a regular basis.
Business Interruption
- If your business has to shut down because of any type of accident, from vandalism to complete destruction of your property, you won’t just be out the money it takes to get back up and running; you’ll be out the revenue you would’ve earned if your doors had been open. Business interruption insurance helps you get a portion of those earnings back, so you don’t fall too far behind.
Are You Covered?
- There are many factors that go into deciding which type of insurance you need when opening a franchise. Talk to your franchisors about the best insurances to get for your business model. Then, get those insurances before you break ground or open your doors, so you’re sure you’re protected from day one. Susan Guillory is the President of Egg Marketing & Communications, a …