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At first glance, tracking and staying on top of insurance compliance for franchise brands seems like common sense. It&rsquo;s written into every brand&rsquo;s Franchise Disclosure Document&mdash;franchisees are legally required to have certain coverages for their locations. However, in actuality, there&rsquo;s no shortage of franchisors who overlook insurance compliance. And according to Doug Groves, founder and principal of <a href="https://www.certmgmt.com/?utm_source=1851franchise.com&utm_medium=article&utm_campaign=why-franchisors-shouldnt-overlook-insurance-compliance-2704715" target="_blank" rel="nofollow" target="_blank">EZ CERT</a>, that&rsquo;s where problems arise.

To avoid the ramifications that come with overlooking insurance compliance, Groves recommends working with an insurance agent who&rsquo;s familiar with the franchising industry. That&rsquo;s why he founded EZ CERT in the first place&mdash;he recognized that there was a glaring gap in the system that franchisors were using to track franchisee compliance. Now, instead of brands taking on the responsibility of hunting down coverage certificates, <a href="https://ezcertmgmt.1851franchise.com/?utm_source=1851franchise.com&utm_medium=article&utm_campaign=why-franchisors-shouldnt-overlook-insurance-compliance-2704715" target="_blank" rel="nofollow" target="_blank">EZ CERT</a> becomes the much needed middle man and uses its expert team to maintain relationships with a franchisor and its system&rsquo;s local owners.

That strong understanding of the franchising industry is essential for brands when tracking compliance. Groves notes that because the industry has its own set of rules and regulations, franchisors need to ensure that they&rsquo;re working with an agency that can operate within those parameters.

&ldquo;Insurance compliance in the franchising industry is completely unique. That&rsquo;s because of the franchisor-franchisee relationship&mdash;while franchisors need their insurance certificates, they don&rsquo;t want to bother or be pushy with their franchisees, who are essentially their customers,&rdquo; said Groves. &ldquo;As long as you understand that key difference, franchisors&mdash;and insurance agencies&mdash;have a chance to succeed. It&rsquo;s why EZ CERT has been able to take off in the industry&mdash;we fully grasp and respect the relationship between franchisors and their local business owners.&rdquo;

It&rsquo;s not just franchisees who need to be worried about their insurance certificates&mdash;franchisors also want to make sure that they&rsquo;re added as an additional insured. That extra protection will come in handy if and when a franchisor is ever named in a lawsuit alongside one of their franchisees.

&ldquo;Franchisors are going to be named in litigation. There&rsquo;s no way around it, and they shouldn&rsquo;t be surprised when it happens,&rdquo; said Groves. &ldquo;People recognize that franchisees are a part of a larger brand, and they think that&rsquo;s where the money is. So, being insured alongside your franchisees is the best way to be prepared.&rdquo;

Groves also recommends that franchisors stay away from mandatory providers even if there are mandatory coverages. Franchisees will get an uneasy feeling if they&rsquo;re forced to go to one specific agency or agent&mdash;that has the potential to seem like there&rsquo;s a deal between the two parties. And once a franchisee has looked through the marketplace to find their provider, it&rsquo;s critical for franchisors to follow up with their franchisees&mdash;or have companies like EZ CERT follow up with their franchisees&mdash;every year to ensure that their policies are up to date.&nbsp; &nbsp;

&ldquo;It&rsquo;s amazing how many franchisors we talk to who take care of their insurance documentation the first year that they&rsquo;re in business, but then never touch it again. It&rsquo;s not a one-time deal&mdash;franchisors need to be updating their insurance policies on an annual basis,&rdquo; Groves said. &ldquo;Things can go astray very easily if franchisors aren&rsquo;t aware that their franchisees have changed agents or aren&rsquo;t insured for required coverages. That&rsquo;s why brands need to check on their dates of renewal and open up the lines of communication when it comes to insurance certificates. And franchisors should hold their corporate locations to the same standards.&rdquo;

Beyond tracking their own certificates from a corporate standpoint, franchisors should also position themselves for long-term success when it comes to insurance coverage. While it may be easy to track compliance for a young franchise that only has 10 locations, that task becomes a lot more complicated as more and more units open their doors for business. Their system for insurance compliance should be set up from the get go to ensure that it&rsquo;s able to last as their brand grows.

That same principle then applies to updating insurance policies and requirements. Because franchising is an industry that&rsquo;s subject to change, franchisors need to stay ahead of the curve and be ready to adjust their system as needed. To do that, Groves recommends that franchisors create a dialogue between themselves, their agency and their franchisees.

&ldquo;I can&rsquo;t overstate how important it is for franchisors to work with an agency that they know and trust. They know the franchising industry inside and out, but agencies know insurance. Let them do what they do best,&rdquo; said Groves. &ldquo;While often overlooked, insurance compliance is a critical part of the franchising process. You don&rsquo;t need insurance until you really need it, so you want to know you&rsquo;re prepared in the event something comes up. If brands keep that in mind and work with the right partners, they&rsquo;re going to be much better off in the long run.&rdquo;

Why Franchisors Shouldn’t Overlook Insurance Compliance

1851 Franchise

Brands can face serious ramifications if they make the mistake of overlooking insurance compliance. EZ CERT founder and principal Doug Groves explains why it’s important for franchisors to stay on top of their certificates. 

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