What insurance does a franchise need?
Insurance is a running cost most buyers under-budget. Here is the cover a franchise usually needs, and why your agreement may mandate it.
What insurance does a franchise need?
The core covers
- Public liability, for injury or damage claims from customers or the public, effectively essential.
- Workers compensation, compulsory once you employ staff, with rules set by each state or territory.
- Business / contents insurance, for the premises, fit-out, stock and equipment.
- Business interruption, which replaces lost income if you cannot trade after an insured event.
Model-specific covers
What else you need depends on the business. Mobile and home-based systems need motor and tool cover; food businesses carry product-liability risk; service and advisory franchises often need professional indemnity. Match the cover to the actual risks of the model rather than buying a generic bundle.
Budget it as an ongoing cost
Insurance is a recurring expense, not a one-off, so build it into your working-capital and operating budget from day one. Get quotes for the specific covers your agreement requires during due diligence, some systems have preferred insurers or group schemes, but you are entitled to confirm the cost before you commit.
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Frequently asked questions
What insurance is compulsory for a franchise in Australia?
Workers compensation is compulsory once you employ staff, under each state or territory's scheme. Public liability is effectively essential, and your franchise agreement commonly mandates minimum cover for it and other risks. Confirm the specific requirements in your agreement.
Does a franchise agreement require specific insurance?
Usually yes. Most franchise agreements set minimum insurance cover and may require the franchisor to be named as an interested party on the policy. Check these clauses and get quotes before finalising your budget.
How much does franchise insurance cost?
It varies widely by model, premises and cover required, so get quotes for the specific policies your agreement mandates during due diligence. Treat it as an ongoing operating cost and build it into your working-capital budget.
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