The Franchise & Entrepreneur Playbook Is Missing a Section: Risk & Insurance

Why savvy franchisors, and entrepreneurs (franchise buyers or investors), are making insurance and risk planning part of the franchise model and purchase discussion consulting with a preferred independent risk advisor and insurance broker partner — before a new owner signs an agreement or opens the doors.

The earlier your start the risk and insurance conversation, the better.

Disclaimer: All content above and below is for educational information only. It is not legal advice. Insurance availability, requirements, terms, limits, exclusions and pricing vary by business, carrier and state. Workers' compensation and commercial auto requirements are governed by applicable state law. Coverage should be reviewed with a licensed insurance professional, such as PROTEXA Risk Advisory, based on the specific business and jurisdiction.

Buying a franchise can feel safer than starting a business from scratch (new venture).

You get a brand. A business model. An operating framework. Support. Training. Marketing. Systems. Vendors. A playbook.

But there is one part of the playbook that can get too little attention:

What happens when something goes wrong?

A customer falls. An employee gets hurt. A delivery driver causes an accident. A hacker steals customer data. A freezer fails overnight. A storm knocks out power. A contractor's completed work causes damage months later.

These are not just "insurance problems."

They are business problems.

And for both franchisors and franchise owners, planning for them before opening day can make a big difference.

Franchising is also growing. The International Franchise Association (IFA) expects the U.S. to add more than 12,000 franchised businesses in 2026, bringing the total to about 845,000 locations and nearly 8.9 million jobs. Child services and commercial and residential services are among the fastest-growing franchise sectors.

That makes risk planning an important part of building — and buying and operating — a franchise.

Franchisee business owners and investors should not wait until someone asks for a certificate of insurance (COI) three days before opening to find out whether the insurance program actually protects the investment and satisfies the contracts (see the Before You Open the Doors: 10 Insurance Questions Every Franchise Buyer or Investor Should Answer section below).

This is exactly why risks and insurance should be assessed, not simply quoted.

For Franchisors: Insurance Can Be Part of the Franchise Value Proposition

Think about the typical franchise pitch.

A franchisor may provide:

• A proven operating model

• Brand recognition

• Training

• Marketing support

• Technology

• Approved vendors

• Site-selection help

• Purchasing programs

• Operating procedures

Now add something many prospective owners may not expect:

A clear plan for protecting the business they are about to invest in.

That can be a meaningful differentiator.

Instead of simply telling franchisees, "You need insurance," a franchisor can include a preferred independent insurance agency and risk advisor in its franchise support model.

There is an important difference between simply getting insurance quotes and managing risk.

A generic retail insurance quote experience starts with:

"What insurance do you want to buy?"

An expert risk advisory consulting experience process starts with:

"What could go wrong with this business and what risk makes sense to transfer?"

Remember, any risk you or your franchisee do not transfer, you or they own ... meaning you are self-insuring and need to have the savings or reserves to cover those risks (losses) should they occur.

An expert consultative risk advisory experience follows a four step process:

Diagnose → Assess → Recommend → Protect

The risk advisor looks at how the franchise actually works: scope of operations, employees, vendors, customers, independent contractors, locations, vehicles, equipment, technology, contracts, property, delivery, products and other risks.

Only then should insurance solutions be considered and quotes requested. An expert risk advisor will know the carriers that have the "appetite" (want or need) for your type of business and will play the role of "match maker" to get you the best insurance value (maximize coverage for premium cost).

Why an independent risk advisor and insurance agency?

An independent risk advisor and insurance broker agency is generally not limited to one insurance company. They typically represent the business owner(s), not the insurance carriers.

That matters because franchises can have very different risks and franchisors frequently operate in many different territories (states) in order to scale.

A restaurant in Georgia is not a restaurant in Florida.

A pet grooming franchise is not an HVAC company. An HVAC company is not a fitness studio.

Even two locations of the same franchise and same ownership may have different risks because of their state or local regulatory statutes, buildings, lease agreements, loan agreements, equipment, payroll, vehicles, employees, or revenue channels.

A preferred independent risk advisor and insurance agency can also help a franchisor create more consistency across the system while still allowing each location's coverage to fit its actual risks.

For a prospective franchise buyer, that sends a powerful message:

"We have thought about more than helping you open. We have thought about helping you stay open."

The Opportunity for Franchisors

There is also a bigger lesson for companies building franchise systems.

A preferred insurance and risk-advisory program can become part of the franchise infrastructure.

The franchisor can establish baseline insurance requirements, provide educational materials during the franchise process, identify common risks, create a consistent onboarding process and connect franchisees with an independent agency that understands the franchise model.

The franchisee still needs coverage designed for its individual operation.

But the owner no longer starts from zero.

In a crowded franchise market, that matters.

The value proposition becomes bigger than:

"Here is how we help you start a business."

It becomes:

"Here is how we help you build, operate and protect the business you are investing in."

That is a different conversation.

What Could It Cost to Insure a New Franchise?

There is no universal "franchise insurance price."

A professional-services franchise might have very little physical risk. A restaurant with employees, cooking equipment and delivery vehicles can have much more.

For planning purposes, national small-business data shows just how wide the ranges can be:

Coverage	Generalized Est. U.S. Annual Premium Range Costs by Insurance Policy Type
General Liability	$250 – $3,000+
Workers' Compensation	$300 – $5,700+
Cyber	$400 – $8,000+
Commercial Auto	$375 – $16,000+
Inland Marine / Mobile Equipment	$150 – $4,500+
Commercial Umbrella	$400 – $7,000+
BOP	$400 – $6,000+
Commercial Property	$350 – $15,000+

These are generalized national educational and budget planning insurance ranges, not quotes. Actual cost can vary greatly based on: business type (scope of operations) • state • revenue • payroll • number of employees • property value • equipment • vehicles • driver records • limits • deductibles • claims history • owner experience • years in business • cyber controls • delivery model • alcohol exposure • franchise requirements

For Franchise Buyers: Know What Could Hurt Your New Business

Insurance can be confusing.

It does not have to be if you consult with an experienced risk advisor and insurance broker.

Here are some of the biggest risks a new franchise owner should understand.

1. General Liability (GL or Businessowners Policy - BOP)

What it is

General liability helps protect your business if someone claims your business caused an injury or damaged their property.

Think:

Slip. Fall. Injury. Lawsuit.

Why you need it

Customers, vendors and other people may enter your business every day.

The Hartford's analysis of more than one million small-business policies found that slip, fall and customer-injury claims represented about 20% of claims, with an average cost of about $45,000.

One accident can become expensive quickly.

National small-business premium range: approximately $250 to $3,000+ per year, with an average around $538 in Insureon's data.

Also see 11 - Tenant Improvements & Betterments (Franchise Build-Out) below for more detail related to tenant improvements and betterments—fixtures, alterations, installations, or additions the tenant paid for in a building it does not own.

2. Workers' Compensation

What it is

Workers' compensation helps pay medical costs and lost wages when an employee gets hurt or becomes ill because of work.

Why you need it

This is not always optional.

State rules vary. Many states require workers' compensation after a business reaches a certain number of employees. Depending on the state, that threshold may be three, four or five employees, while some occupations have different rules. Texas is unusual because private-employer workers' compensation is generally optional.

For example, Georgia generally requires coverage when a business regularly employs three or more people, including regular part-time employees. Florida generally requires it at four employees for non-construction businesses and one employee for construction businesses.

And claims are not small. Insureon cites an average workers' compensation claim of almost $50,000, based on National Safety Council data.

National small-business premium range: roughly $300 to $5,700+ per year.

Payroll, employee job duties and state law can change this number greatly.

3. Cyber Liability

What it is

Cyber insurance can help when your business suffers a data breach, ransomware attack, computer attack or certain types of cyber fraud.

Why you need it

You do not have to be a technology company to have cyber risk.

If you collect names, email addresses, payment information, employee records or other personal information, you have data someone may want.

Verizon's 2026 Data Breach Investigations Report analyzed thousands of incidents affecting small and midsized organizations and found ransomware and other cyber threats disproportionately affect smaller organizations, which often have fewer resources to respond.

A franchise's shared technology can make cyber planning even more important.

National small-business premium range: approximately $400 to $8,000+ per year, although larger or more complex businesses can pay substantially more.

4. Commercial Auto

What it is

Commercial auto protects vehicles used by the business.

If employees use personal vehicles for work, the business may also need Hired and Non-Owned Auto (HNOA) coverage.

Why you need it

Driving creates one of the largest loss exposures for many businesses.

The Hartford's 2025 small-business claims analysis found vehicle accidents averaged about $50,000 per claim, and costs can be higher when lawsuits are involved.

This is especially important for restaurants and service franchises with delivery vehicles, vans or technicians driving between customers.

National small-business premium range: from roughly $375 to more than $16,000 per year, depending heavily on service area (state, intrastate, interstate), vehicles (age, replacement cost, type, size, and weight), drivers, and use.

5. Business Interruption & Utility Failure

What it is

Business interruption — also called business income coverage — can help replace lost income and certain ongoing expenses when a covered event forces the business to temporarily close.

Depending on the business and policy, additional endorsements may be needed for certain utility-service interruptions.

Why you need it

Your building does not need to burn down for your income to stop.

Imagine a restaurant without refrigeration.

A salon without electricity.

An auto shop without operating equipment.

A technology-based franchise without critical systems.

FEMA says roughly 40% to 60% of businesses affected by a major disaster never reopen.

A U.S. Department of Energy/Lawrence Berkeley analysis estimated power interruptions cost U.S. electricity customers about $79 billion annually, with commercial customers accounting for most of the estimated loss.

Premium: business-income coverage is commonly added to a BOP or commercial property program, so there is not a useful single national standalone range. For context, small-business BOP premiums in Insureon's data range from roughly $400 to $6,000+ annually.

Ask specifically about off-premises utility failure, dependent properties and waiting periods. Do not assume they are automatically covered.

6. Equipment Breakdown

What it is

Equipment breakdown coverage can help pay when important mechanical, electrical or electronic equipment suddenly fails from a covered cause.

Why you need it

For some franchises, equipment is the business.

Think HVAC systems, refrigeration, compressors, boilers, electrical systems, salon equipment, diagnostic equipment or production machinery.

The Hartford's recent small-business claims analysis found fire losses averaged about $80,000, while water and freezing damage averaged about $34,600. These are different causes of loss, but they show how quickly physical-property events can become expensive.

Equipment breakdown coverage can address certain equipment failures that ordinary property coverage may not.

Premium: often added to a BOP or commercial property policy rather than purchased alone. Pricing depends heavily on the type, age and value of the equipment, business size, location, limits and claims history.

7. Products & Completed Operations

What it is

This coverage can help protect your business when something you sold, installed, repaired, serviced or built causes injury or property damage after the work is finished.

For HVAC, plumbing, electrical and other artisan construction / contractor service franchises, this is especially important.

Think:

HVAC installation → fire or water damage later

Plumbing repair → pipe or fitting fails later

Electrical work → fire later

Roof repair → water intrusion later

Equipment installation → property damage or injury later

Outdoor kitchen / living area construction → fire, gas leak, water damage, structural damage or injury later

Why you need it

The job being finished does not mean the risk is finished.

A technician can complete a job correctly as far as anyone knows, leave the customer's property, get paid—and the business can still face a large claim weeks, months or even years later.

The Insurance Information Institute explains that contractors need liability protection for bodily injury or property damage caused by their operations and completed work (Insurance Information Institute — Artisan Contractors Insurance).

The Hartford's small-business claims research also found that water and freezing claims averaged about $34,600, while fire claims averaged about $80,000. Those are particularly relevant loss types when thinking about plumbing, HVAC and electrical work, although those figures are not limited to contractor completed-operations claims.

Products-completed operations coverage is commonly included within a Commercial General Liability policy, but franchise owners should not assume every loss arising from their work is covered. Policy exclusions, subcontracted work, contractual requirements, limits, completed-operations aggregates and the nature of the work can matter.

For HVAC, plumbing, electrical and artisan construction / contractor / installation similar franchises, ask specifically:

“If our work, or products we assemble and install, causes bodily injury or property damage after we leave the job, how does this policy respond—and what are the limits?”

Typical premium: Products-completed operations is generally part of the CGL premium rather than priced as a separate standalone policy. Cost varies significantly based on trade, revenue, payroll, subcontractor use, work performed, claims history, limits and location.

8. Food-Related Liability

What it is

Restaurants and food franchises need protection against claims that food or beverages caused illness or injury.

Depending on operations, this can involve product liability, general liability, spoilage, contamination, liquor liability and other specialized coverage.

Why you need it

CDC researchers studied 800 foodborne illness outbreaks tied to 875 retail food establishments. More than 81% of the establishments involved were restaurants.

For a restaurant, one food safety event can affect customers, revenue and the brand at the same time.

Restaurant insurance therefore needs to be designed around the actual operation — cooking, refrigeration, alcohol, catering, delivery and other activities.

Restaurant BOP coverage averages about $3,010 per year in Insureon's data, while restaurant commercial auto averages another $2,173 annually when vehicles are needed.

That is why direct delivery versus third-party delivery matters.

9. Mobile Equipment & Inland Marine

What it is

Despite the name, inland marine insurance usually has nothing to do with boats.

It protects certain business property that moves.

Think tools, computers, lawn equipment, specialized equipment and property taken to customer locations.

Why you need it

A standard property policy may focus on property at the insured location.

But many franchises make money somewhere else.

Home services, restoration, cleaning, landscaping, pet services and mobile concepts may have thousands of dollars of equipment traveling every day.

Inland marine insurance specifically protects portable property while it is away from the main business location.

National small-business premium range: approximately $150 to $4,500+ per year.

10. Commercial Umbrella

What it is

An umbrella policy provides another layer of liability protection above certain underlying policies, such as general liability, commercial auto and employer's liability.

Why you need it

This may be one of the most overlooked protections for a small business.

A $1 million liability limit sounds like a lot of money — until there is a serious auto accident, major injury or lawsuit.

Umbrella insurance is designed for the claim that breaks through the limits below it.

That is particularly important for a franchise owner who may have significant personal capital invested in the business, employees on the road or heavy customer traffic.

Small businesses pay an average of about $86 per month for commercial umbrella coverage in Insureon's data.

National premium range: roughly $400 to more than $7,000 annually.

Skipping umbrella coverage simply because it is not required can leave a large hole in the protection strategy.

11. Tenant Improvements & Betterments (Franchise Build-Out)

What it is

Many franchisees lease their location but spend their own money improving it.

Think:

Walls. Flooring. Lighting. Plumbing. Electrical work. Built-in counters. Cabinets. Permanent fixtures. HVAC improvements. Restaurant build-outs.

Insurance calls these Tenant Improvements and Betterments (TIB).

They are improvements you paid for in a building you do not own and generally cannot take with you when you leave.

Why you need it

Your landlord's building insurance should not be assumed to protect the money you invested in your build-out.

Insurance compliance is a contract issue as well as a risk issue. A franchisee can have insurance and still be underinsured or out of compliance if the policy does not satisfy the lease, financing agreement, or franchise agreement. Travelers specifically advises commercial tenants to understand lease insurance requirements and ensure property limits match the value of their assets.

The Insurance Information Institute says commercial property or BOP coverage for a tenant can cover fixtures, alterations, installations and additions the tenant makes to leased space. It also recommends updating insurance when new construction improvements are made.

That matters because build-outs can be expensive. Travelers notes that preparing and restoring commercial space can add thousands of dollars beyond the base rent, with costs depending on what the business must install. For some franchise concepts, the investment can be much larger: The Hartford notes that property and equipment costs alone for opening and operating a Subway franchise can exceed $100,000.

If a fire or another covered event destroys a $100,000 build-out, having "property insurance" is not enough if the policy does not properly recognize and value your improvements.

Before construction starts — and again before opening — ask:

Who paid for the build-out? You, the landlord, or both?

Who owns the improvements? Your lease may say certain improvements become the landlord's property.

What did the completed improvements actually cost? Make sure the insurance limit reflects the value you need to protect. Travelers specifically recommends considering the improvements made to the space and the local cost to rebuild when selecting property limits.

Was a loan used to finance the build-out? If so, review the loan agreement for required insurance, limits, loss-payee or lender provisions, and other conditions.

What does your lease require? Commercial leases commonly establish insurance

requirements for tenants.

What does the franchise agreement require? Your franchisor may have its own minimum coverage, limits and other insurance requirements.

Are you protected during construction? Coverage needed while improvements are being built may differ from the insurance needed after construction is complete.

Bottom line: Make sure your insurance complies with your lease, loan and franchise agreements and that the value of your completed improvements is properly insured.

Do this before construction begins, update the values when the build-out is completed, and review them again when the business opens.

A certificate of insurance may show that a policy exists. It does not by itself prove that your build-out is adequately protected.

Before You Open the Doors: 10 Insurance Questions Every Franchise Buyer or Investor Should Answer

• Meets the franchise agreement requirements

• Meets the commercial lease requirements

• Meets any loan/lender insurance requirements

• Covers the full value of Tenant Improvements & Betterments

• Covers the business during build-out/construction, where applicable

• Reflects actual equipment, inventory and business property values

• Addresses business income and utility interruption

• Covers all vehicles, drivers and delivery activities

• Meets the state's workers' compensation requirements

• Includes appropriate cyber and umbrella limits

• Has all required Additional Insured, Loss Payee, Lender/Mortgagee and Waiver of Subrogation provisions where contractually required

Insurance Should Start Before Opening Day — Not After the First Claim

The best time to discover a risk is before you own it.

For a franchise buyer, insurance planning should therefore begin during due diligence — not a few days before opening when someone asks for a certificate of insurance.

A risk-focused independent broker can review:

People → Property → Operations → Vehicles → Equipment → Technology → Contracts → Income → Liability

That allows the owner to understand three things before opening:

What could happen?

What could it cost?

How are we going to protect against it?

That is risk management in plain English.

About PROTEXA Risk Advisory™

At PROTEXA Risk Advisory, we help growth-oriented, risk conscious business owners, and wealth preservation minded individuals, protect what they’ve built — in business and in life. Company website: https://www.protexaadvisory.com/

We are an independent risk management, asset protection, and insurance broker advisory firm serving new, emerging, and established small to mid-market (SMB) business owners, operators, franchisors, franchisees, and entrepreneurs. Our approach integrates commercial and personal property & casualty (liability) risk management, asset protection, and strategic risk guidance into one trusted advisory relationship.

About PROTEXA's Total Risk Assessment℠ (TRA)

A comprehensive evaluation of your business and/or personal risk and asset portfolio exposures. Our expert licensed risk & insurance advisors diagnose, assess, and analyze your risk exposures, including any current coverage gaps, and provide strategic risk management recommendations tailored to your unique risk management and asset protection coverage needs. As an independent insurance broker, we place coverage with a carrier that best fits your needs. We work for you, not the insurance carrier.

About PROTEXA's Dr. Risk Scorecard℠ (DRS)

The PROTEXA Dr. Risk Scorecard (DRS) is an advisory output generated from one or more PROTEXA assessment pathways, including completion of the PROTEXA Initial Risk Triage (IRT), PROTEXA Total Risk Assessment (TRA), and/or review of existing insurance policies, declarations pages, certificates of insurance, and related coverage documentation submitted for analysis.

The Dr. Risk Scorecard is not a standalone solution—it is tightly integrated with the PROTEXA risk assessment methodology and architecture. The DRS synthesizes assessment findings into a structured view of risk exposure, risk proximity, coverage gaps (not covered, under covered, etc.), asset protection readiness, and advisor recommendations.