Reading your Franchise Disclosure Document Insurance Requirements

The Franchise Disclosure Document (FDD) provides information about the franchisor, the franchise systems, and franchisee agreements. It includes information about fees, estimated costs, and contractual obligations. This is where the insurance coverage a franchisor requires can be found. While not all FDDs are the same, here are some best practices to help find and better understand the insurance references found in this document.

Here are some places where insurance is typically mentioned:

• Item 9 can act as a Table of Contents for the FDD. This item is an overview of what obligations a franchisee is responsible for and where those are found within the FDD. Included in this should be references to insurance requirements. So, this is a good place to start when reviewing insurance stipulations.

• Item 6 will usually show line items of upfront and ongoing fees. Insurance will likely be mentioned here and the franchisee’s obligation to procure and maintain adequate coverage.

• Item 7 lays out fees and expenses required to open and operate a franchise for the first few months. This is an estimation of the initial investment. Typically included is a projected range of insurance premiums.

Insuring your investment is not only a prudent business decision, it is also part of the franchise agreement. Program Insurance Group has the franchise knowledge and experience to insure any type of franchise business. We understand the unique liabilities and needs of franchises, and are here to help you find the best protection for your business. Our agents will work one-on-one with you to design a complete business insurance package to fit your unique coverage needs and obligations.