The franchise business model continues to be very popular across the United States, particularly in large metropolitan areas such as San Diego due to opportunities to offer goods and services to the sizable population of Southern California. In general, franchise agreements allow business owners to hit the ground running as they operate under the guidance of established brands. These agreements often state numerous requirements that the franchisee must constantly meet for compliance, and a few of these requirements deal with San Diego commercial insurance coverage.
When thinking about their profit and success potential, franchise operators should not fall into a tunnel vision situation. They must also think about their potential for liability and financial loss. For the most part, franchising agreements require minimum coverage to comply with local business rules and to protect the franchisor. This leaves it up to the franchisee to seek additional coverage the business may need. Here are some of the typical requirements.
This is the standard coverage that protects the business in case of injuries and damages, particularly in a brick-and-mortar premise.
The losses covered under this damage are usually caused by fires, flood waters, accidents, vandalism, and some natural disasters. Depending on the coverage offered by the insurance company, equipment may also be included.
Franchisees need to protect their inventory, and franchisors need to make sure their goods do not cause injury or damage to consumers.
This is a state requirement for franchisees who are also employers. If you need workers’ compensation insurance in San Diego, speak with a trusted insurance agent to ensure you receive the type of coverage you need.
The franchisor will often insist on this coverage since aggrieved employees are known to take legal action against major brands. Employment practices liability insurance in San Diego is readily available.
Franchise Insurance Considerations
In some cases, the legal departments of franchisors may advise franchisees about the need for certain coverage limits, and they may also insist on getting an endorsement so the franchise owner is properly named as an insured. The franchisee should run this advice by his or her insurance agent before taking action.
Another insurance matter to think about is related to the liability limits and deductible amounts. The type of coverage and the dollar amounts agreed upon when the franchise started operating may not remain the same over time. The franchisor may impose certain insurance conditions over the years by reviewing the operations manual, but a franchisee should be proactive in this regard and consult with insurance agents from time to time.
There may be situations when the coverage presents gaps or is excessive when taking into consideration the franchisor has its own insurance policies in effect. For this reason, it is up to the franchisees to submit their coverage for review with their agents. One example of excessive coverage would be cyber insurance when the franchise agreement states that the franchisee must use the cloud platform of the franchisor. In this case, the liability of a potential data breach does not fall on the franchisee.
If you are running a franchise and need commercial insurance, get in touch with American Tri-Star of San Diego. We also offer affordable health, bond, home, and auto insurance. Call 619-272-2100 today to speak with one of our knowledgeable representatives.