Many franchisees are not adequately insured, either being under or over insured, thereby increasing their operational risk. For example, if the franchisee is under-insured and their premises burns down, both the franchisee and franchisor lose a substantial amount of money. The franchisee will lose stock, trading and income; whereas the franchisor will also lose income in royalties and marketing contributions. Another crucial aspect to remember is that the major banks require proof that the franchisee has adequate insurance cover before they grant the required funding.

‘We have designed the Product to cater for certain key benefits’

“The franchise business model encompasses a range of vastly different businesses. However, there are some key challenges that may be common among them. As a result we have specifically designed this product to cater for certain key benefits that a normal commercial policy would not cover, at extremely competitive pricing for this niche market,” Smit said.

Some of the key benefits were to automatically include in the franchising product deterioration of stock, malicious damage to property and franchise-specific liability covers. “These are major risks that can seriously derail an emerging franchise if there is not sufficient cover in place”

According to Smit, another critical benefit that is included in the franchise insurance product is loss of income, which can be extended to cover franchise royalties. Franchisees are required to make an ongoing royalty payment to the franchiser for the right to use the brand. However, if the franchisee defaults, he or she is often immediately in breach of the franchise agreement.

“This kind of cover can be vital in sustaining a franchise business in difficult times.”

Smit said that it was important for franchise owners to take the time to speak to their brokers about the specific threats their business might face and to ensure they have coverage that suits their needs. “Advice is paramount when insuring a business. It is vital that franchisees speak to a broker who has the expertise to advise them on all the risks they face and to recommend an insurance policy that can guard against these risks.”

Other benefits of the Franchise Policy include:

  • Automatic geyser cover
  • Claims preparation costs
  • Public utilities
  • Automatic money increase in December limited to 15% of major limit
  • Automatic cover for reinstatement of data up to R20 000 and software of R5 000
  • Liability cover automatically includes food poisoning cover up to R1 000 000
  • Malicious damage to property automatically included under the Theft Section of R10 000.

For more information, call Franchising Plus on +27(0)11 454-2235 or email