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Higginbotham has a team of tenured insurance professionals who understand the risks inherent to the franchise industry, managing multi-regional franchise programs without sacrificing personalized service. Our team of insurance, risk management, safety, loss control and claims specialists work cohesively to give you coverage and risk management solutions to help you run your franchise business.
Franchise insurance involves two parties: franchisees and franchisors. A franchisor is the individual or company that owns the franchise’s trademarks and business model, which are licensed to the franchisee in exchange for a fee. The franchisee then owns and operates their business, which is branded as and follows the guidelines of the franchise company. The franchisee-franchisor relationship is established by a franchise agreement, also known as a Franchise Disclosure Document (FDD).
While the franchisee and franchisor work closely together to do business, both parties have unique insurance and risk management needs.
Whether you’re just beginning to franchise your business or already have franchisees across the country, Higginbotham’s franchise insurance team can help to develop a national insurance program that works for your organization.
Higginbotham’s franchise program development process also includes a review of your FDD and a review or creation of insurance requirements and safety training for franchisees. We often find that franchisors are not requiring appropriate coverage and indemnification from their franchisees. Once these requirements have been developed, our team works with franchisors to verify coverage and provide training for new franchisees.
With Higginbotham, you get more than just an insurance policy; you gain a partner dedicated to your success. We leverage our extensive industry experience and strong carrier relationships to provide comprehensive coverage options that protect your franchise’s assets, employees and reputation. Our goal is to give you the peace of mind you need to focus on growing your franchise with confidence, knowing that you are well-protected against potential risks.
Commercial general liability (CGL) insurance is perhaps the most essential insurance coverage that a business can have. A CGL policy is designed to protect your business from financial losses that result from claims of bodily injury, property damage, libel, slander and advertising injury to others caused by your business or your employees. For example, if a customer of your business slips and is injured, your CGL policy could help pay for the customer’s medical expenses (up to the limits of the policy).
Directors and officers (D&O) insurance is a form of professional liability coverage that protects the directors, officers and trustees of an organization from claims alleging financial loss due to mismanagement. It helps to prevent these leaders from suffering personal losses due to lawsuits alleging wrongful acts or illegal business activities. Typically, D&O insurance does not cover liability for fraud or criminal misconduct, but it can help safeguard directors and officers against unintended transgressions and some forms of negligence.
Cyber liability insurance can cover a variety of liability and property losses that may result when your business is engaged in electronic activities, such as e-commerce or internal electronic data collection. Cyber coverage also helps cover your business’s liability for a data breach in which your customers’ personal information is stolen or exposed by a hacker or cyber criminal. While it does not cover theft of client information by employees, a cyber liability policy can help cover a variety of data breach expenses, such as:
Notably, cyber liability insurance does not cover theft of customer information by employees.
Professional liability insurance, also known as errors and omissions (E&O) insurance, is a form of liability coverage that’s designed to protect professionals from liability incurred as a result of errors, omissions or mistakes that are made while performing their services.
Franchisors’ malpractice insurance, also known as franchisor’s errors and omissions insurance, is designed to protect your franchise from claims filed against you by current, former and prospective franchisees. A few examples of issues that could be covered under this policy include:
Business property insurance helps cover the property and facilities owned or leased by your business. This could include the buildings themselves and the equipment, tools, inventory and furniture stored inside buildings or on the property. It can help protect your business property from risks like fire, theft, burst pipes and wind damage.
Crime insurance can help protect your company from business-related crime, such as employee dishonesty and criminal acts like forgery, extortion and counterfeit money. Common exclusions in a third-party crime policy include the mysterious disappearance of property, theft of the insured’s property and acts committed by employees with prior “dishonest acts.”
Workers’ compensation, or workers’ comp insurance, helps to pay for expenses incurred if an employee is injured while on the job.
Costs covered under a workers’ compensation policy could include medical bills, rehabilitation, ongoing care and even lost wages. In the unfortunate event of an employee fatality, workers’ comp can help to cover funeral costs and compensation for the employee’s family. Workers’ compensation can also help cover costs from a work-related injury lawsuit filed by an employee, such as legal expenses, damages and settlements.
In many states, this coverage is more than just a business safeguard – it’s a legal requirement. Businesses that fail to comply with the workers’ comp requirements in their region, state or locale could face fines, penalties and jail time, in addition to paying damages sought by an injured employee. Because of this, many franchisors require workers’ compensation insurance for their franchisees, and may even require specific policy terms or limits to help protect the organization.
It’s important to note that workers’ comp usually does not cover business owners or officers (unless added to the policy), and may have state limitations depending on your domicile location.
Commercial auto insurance can help protect your business-owned vehicles and drivers while they are performing work duties. It can provide coverage if a company vehicle is involved in a crash that causes property damage or injuries to others. It can also help cover damage to your own vehicles from collisions, theft or other covered incidents. For franchises that rely on company cars, vans or trucks to complete daily operations or make deliveries, this coverage can help reduce the financial risk that can come with accidents on the road.
Hired and non-owned auto (HNOA) insurance is a specific type of commercial auto insurance that provides liability protection when employees use personal or rented vehicles for business purposes. If an accident happens while driving a non-company vehicle for work, your business could still be held responsible. HNOA coverage can help reduce this financial risk and is useful for franchises that do not own vehicles.
It’s important to note that HNOA insurance generally does not cover:
Equipment breakdown insurance helps to protect your operation from the costs associated with sudden mechanical or electrical equipment failures. This coverage can apply to essential items like boilers, HVAC systems, refrigeration equipment, point-of-sale systems and other machinery that keeps your franchise running.
If equipment fails, coverage may help pay for repairs or replacement and, depending on your policy terms, losses that result from the interruption of your operations. This protection can be particularly important for franchises that depend on specialized equipment to deliver services or maintain productivity.
Employment practices liability insurance (EPLI) offers protection against claims from current or former employees alleging wrongful acts. It helps to pay the cost of defending claims of wrongful termination, sexual harassment, failure to hire or promote, discrimination and other improper employment practices. While EPLI coverage will not pay for fines or penalties imposed by the court, it can help to cover punitive damages where permitted by law.
Commercial umbrella insurance provides excess liability protection over the primary limits of your auto, general liability and other commercial insurance policies. In doing so, it provides your business with additional limits of insurance. Excess liability insurance does not cover property or any coverage that is not scheduled on the policy.
At Higginbotham, we do more than insurance. Our team is dedicated to providing risk management services to our clients through tailored programs to fit their industry. Higginbotham clients benefit from a range of in-house services and solutions, such as:
Stephanie Johns is a Managing Director at Higginbotham and serves as the firm’s franchise insurance specialty practice leader. With more than 22 years in the insurance industry, Stephanie’s focus is on creating and managing national insurance programs for franchisees, franchisors and associations.
In addition to leveraging her strong relationships with insurance carriers, Stephanie uses a franchisee or franchisor’s unique characteristics to help negotiate better rates and secure specialized coverage to develop a client’s insurance program. Stephanie is knowledgeable of the franchise business structure and works closely with franchisors to develop or modify insurance requirements for franchisees.
She is licensed in all 50 states and Washington, D.C., with franchise clients operating across the United States in a variety of industries.
Franchise insurance is important for both franchisors and franchisees. The right coverage can help address potential risks associated with operating a franchise, such as property damage, legal claims and business disruptions. Coverage can be structured to support the unique responsibilities and risks of each party.
Coverage needs will vary, but common policies for franchises include general liability, commercial property, workers’ compensation, commercial auto and cyber liability. Some franchise operations may need more specialized types of coverage, such as franchisors’ liability, EPLI or equipment breakdown insurance.
The cost of coverage will vary widely based on factors like location, industry, business size, scope of operations, number of locations and claims history. Keeping a safe work environment and implementing a strong risk management program could help to lower premiums over time.
Franchises face a range of exposures, including employee injuries, customer accidents, cyberattacks, legal disputes with employees or franchisees, property damage and business interruptions.
Many franchise agreements require the franchisor to be listed as an additional insured on the franchisee’s insurance policies. This can help protect the franchisor if a claim arises.
Offering health benefits can help support employee well-being and retention, but requirements will vary by state and workforce size. Some franchisors may provide benefits guidance or access to group plans.
Start by reviewing your franchise agreement and identifying your operational risks. State-specific regulations may also influence your policy requirements. Working with an advisor who understands franchise models can help ensure that you align your coverage with your franchise’s business needs.
Carefully review the insurance section of your franchise agreement and confirm that your policies meet the required limits and endorsements. Your insurance advisor can assist in making sure your coverage meets the requirements set by the franchise organization.
Some policies can extend across multiple locations if they are all owned by the same entity, while others may require location-specific coverage. Your insurance advisor can evaluate your operational structure to help determine the most effective insurance strategy to balance cost and coverage.
Each state has its own insurance regulations and requirements, which can impact your coverage needs. Policies may need to be adjusted or supplemented to help ensure compliance across all locations.
A franchise insurance program offers consistent, coordinated coverage options for franchise owners. With coverage options set based on franchisor requirements, it can help support compliance, streamline coverage and improve protection across the entire franchise brand. In addition, if franchisors utilize a structured insurance program, franchisees may be able to secure exclusive rates.
Yes, options like franchisors’ liability insurance can help protect against claims from current or prospective franchisees. Other specialized coverages may be available based on your industry.
Franchisors typically require franchisees to carry coverages like general liability, property, automobile liability, cyber, umbrella and workers’ compensation. Additional policies may be required to address other operational exposures. Requiring franchisees to name the franchisor as an additional insured and including a waiver of subrogation is usually recommended. Higginbotham can help your franchise company create insurance requirements and guidelines for your franchisees.
Whether you are a franchisee looking for tailored coverage or a franchisor needing to protect your brand, Higginbotham is here to help you every step of the way. Talk to a member of our team to learn more about our comprehensive franchise insurance programs.
