What franchisors require: the insurance schedule in a franchise agreement

What your franchise agreement actually requires

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A franchise agreement requires a schedule of coverage that protects the brand as well as you: general liability with the franchisor as additional insured, property and business income on the location, workers' compensation, usually employment practices liability, an umbrella, and increasingly cyber. The franchisor audits certificates annually and can treat a lapse as a default under the agreement.

Reviewed by Michael LaBarbera, Licensed property & casualty agent, Provident Financial Group · Reviewed Oct 11, 2026 Updated Oct 14, 2026

Typical requirements and how to check them
Requirement	What they usually ask for	How to check what you have
General liability	Per-occurrence and aggregate limits set in the schedule, the franchisor and its affiliates as additional insured, often primary and non-contributory	Dec page limits; blanket additional insured form that includes franchisors or a scheduled form naming the franchisor.
Property and business income	Replacement cost on the build-out, equipment, signage and inventory; business income for a stated period	Property section of the BOP; brand signage and specialized equipment included at replacement cost.
Workers' compensation and employers' liability	Statutory, with employers' liability limits in the schedule	Information page Part Two for the three employers' liability limits.
Employment practices liability	A stated limit, sometimes with third-party coverage for customer claims	A separate EPLI policy or endorsement; check whether it includes third-party coverage.
Umbrella or excess	A layer above GL, auto and employers' liability at the schedule's limit	Umbrella dec page scheduling the underlying policies.
Commercial auto	Where the business operates vehicles: owned, hired and non-owned at a stated limit	Auto dec page or hired and non-owned endorsement on the liability policy.
Cyber liability	Increasingly required where the brand runs loyalty, ordering or payment systems	Separate policy or endorsement with breach response and liability limits.
Product and liquor liability (where relevant)	Included in GL for most brands; liquor liability for brands that serve alcohol	Liquor shows as its own line or form on the dec page.

Requirement

What they usually ask for

How to check what you have

General liability

Per-occurrence and aggregate limits set in the schedule, the franchisor and its affiliates as additional insured, often primary and non-contributory

Dec page limits; blanket additional insured form that includes franchisors or a scheduled form naming the franchisor.

Property and business income

Replacement cost on the build-out, equipment, signage and inventory; business income for a stated period

Property section of the BOP; brand signage and specialized equipment included at replacement cost.

Workers' compensation and employers' liability

Statutory, with employers' liability limits in the schedule

Information page Part Two for the three employers' liability limits.

Employment practices liability

A stated limit, sometimes with third-party coverage for customer claims

A separate EPLI policy or endorsement; check whether it includes third-party coverage.

Umbrella or excess

A layer above GL, auto and employers' liability at the schedule's limit

Umbrella dec page scheduling the underlying policies.

Commercial auto

Where the business operates vehicles: owned, hired and non-owned at a stated limit

Auto dec page or hired and non-owned endorsement on the liability policy.

Cyber liability

Increasingly required where the brand runs loyalty, ordering or payment systems

Separate policy or endorsement with breach response and liability limits.

Product and liquor liability (where relevant)

Included in GL for most brands; liquor liability for brands that serve alcohol

Liquor shows as its own line or form on the dec page.

Where the requirement hides

Franchise agreements put insurance in a dedicated article and in the operations manual, which the agreement incorporates by reference and which the franchisor can update. Read both, and expect the manual to be more specific than the agreement.

Why the schedule looks bigger than a typical lease

The franchisor is protecting a brand across hundreds of locations. Its schedule is written for the largest, most complex unit in the system and then applied to every franchisee, so a small location can be asked for an umbrella and EPLI that a comparable independent business might skip. The requirement is contractual, so the comparison that matters is price for the schedule, not whether the schedule is reasonable.

Annual compliance

Most franchisors run an annual certificate audit, often through a third-party compliance service that matches certificates against the schedule line by line and rejects anything missing a form reference. Live certificates make this routine: one link, every renewal.

What to send the franchisor

A certificate covering every line in the schedule with the franchisor and affiliates as additional insured where required, the endorsement forms referenced, and the limits meeting or exceeding the schedule. When the brand uses a compliance portal, upload the endorsements alongside.

Questions people actually ask

Why does the franchisor need to be an additional insured on my policy?

Claims from your location frequently name the brand too. Additional insured status lets the franchisor be defended under your policy for claims arising from your operations, which is why it sits in nearly every franchise agreement.

Can I use the franchisor's recommended insurance program?

You can, and some brands negotiate good terms. You are not usually required to; the agreement sets what to carry, not where to buy it. Comparing the program against the market at renewal is reasonable.

What happens if my coverage lapses?

Most agreements allow the franchisor to buy coverage on your behalf and charge you, and some treat a lapse as a default. Keeping the certificate live avoids both.

Do I need EPLI as a small franchise location?

If the schedule says so, yes. Even where it does not, employment claims are among the most common for retail and food service locations and general liability does not cover them.