How does choosing/buying insurance for a franchise restaurant differ from choosing/buying insurance for an independent restaurant?
Some franchisors will dictate coverage types and amounts, and some might even dictate the actual carrier. Complying with the franchise-approved/required coverage plan does make it easier to arrange coverage instead of in the case of the independent that has to arrange their own, specific coverage. An independent can select their carrier, coverage, etc. Some franchise organizations will require that the franchise location(s) be insured within a Master policy.
What kinds of misconceptions might people have about restaurant insurance?
That it is easily placed. Financials, experience, regularly required automatic extinguishing equipment inspections and cleaning (all by contract); the need for adequate Business Interruption coverage – the single most important coverage for the owner if they want to reopen after the fire or other calamity. Many carriers are willing to insure restaurants but only if they have that “best practices” model of operation.
Who actually deals with the insurance for a franchise restaurant? The franchisee or the franchisor?
Depends on the franchisor and the contract. Wallace & Turner has seen it both ways.
What types of coverage do franchise restaurants need?
All of the regular restaurant-standard coverages but don’t forget about “reputation coverage.” Case in point, Papa John’s. The franchisees have to be reeling from the fallout caused by the founder – and if you haven’t seen the commercials, they’re from the local franchise owners telling us not to forget them, and what goes on corporately has nothing to do with them…continue to buy their product from their local small business owner. And then there was Chipotle with food product issues.
Any questionable insurance practices to look out for?
I wouldn’t call it questionable but many times an insurance carrier will have a better appetite for the new account, only to decide after some claims in the particular industry (restaurants for example) that they’ll leave that market or territory.
What would you say is the biggest mistake someone can make when choosing insurance for a restaurant franchise?
Inadequate Business Interruption (Income) coverage. The success rate of start-up restaurants is relatively low, then combine that with a calamity that puts them out of business for any length of time, whether it is weather related or a “bad food” item or recall, and they’re forced to rely on the insurance to bring them back to life.
Wallace & Turner has experience insuring franchise and independent restaurants. If you have questions about insurance coverage, contact us to learn more about your options.