What retail franchisors require of franchisees: the insurance section of a retail franchise agreement and how to prove you meet it

What your retail franchisor requires

QUICK ANSWER

A retail franchise agreement typically requires general liability of $1M per occurrence and $2M aggregate including products coverage with the franchisor as additional insured, replacement-cost property on the branded fit-out and inventory, business income that covers rent and royalties, statutory workers' compensation, hired and non-owned or commercial auto where the store delivers, an umbrella of $1M to $2M, and certificates filed with the franchisor before opening and at every renewal.

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
Commercial general liability	$1M each occurrence / $2M aggregate with products-completed operations included, the franchisor, its parent and affiliates as additional insureds, primary and non-contributory; some brands require $2M per occurrence	Dec page limits, the products-completed operations aggregate and the additional insured form named in the manual.
Property on the branded fit-out and inventory	Replacement cost on the brand's fit-out, fixtures, signage, point-of-sale systems and inventory, often with a minimum tied to the initial investment and a seasonal increase for peak stock	Business personal property and tenant improvements limits on the BOP, the valuation basis and any seasonal endorsement.
Business income including royalties	Rent, royalties, marketing fund contributions and continuing expenses through a covered closure, commonly twelve months, with extra expense for a temporary location	Business income line and period of restoration; confirm the limit reflects royalties that keep accruing.
Workers' compensation and employers' liability	Statutory plus employers' liability of $500K or $1M	Information page of the policy, Part Two limits.
Auto where the store delivers	Hired and non-owned auto of $1M where staff deliver in their own cars; commercial auto with vehicles scheduled where the store owns them	The hired and non-owned endorsement or auto dec page.
Umbrella or excess liability	$1M to $2M following form over general liability, auto and employers' liability	Umbrella dec page and underlying schedule.
Crime and cyber where the brand requires	Employee dishonesty and funds transfer fraud; cyber liability where the franchisee runs the point-of-sale and loyalty systems locally	Crime and cyber dec pages where the manual lists them; many brands run the systems centrally and require only crime.
Certificates and approved carriers	Certificates filed before opening and at each renewal through the franchisor's portal, carriers rated A- or better, notice of cancellation, and the franchisor's right to buy coverage and charge the franchisee if it lapses	The manual's insurance section; a live certificate meets the renewal and notice conditions.

Requirement

What they usually ask for

How to check what you have

Commercial general liability

$1M each occurrence / $2M aggregate with products-completed operations included, the franchisor, its parent and affiliates as additional insureds, primary and non-contributory; some brands require $2M per occurrence

Dec page limits, the products-completed operations aggregate and the additional insured form named in the manual.

Property on the branded fit-out and inventory

Replacement cost on the brand's fit-out, fixtures, signage, point-of-sale systems and inventory, often with a minimum tied to the initial investment and a seasonal increase for peak stock

Business personal property and tenant improvements limits on the BOP, the valuation basis and any seasonal endorsement.

Business income including royalties

Rent, royalties, marketing fund contributions and continuing expenses through a covered closure, commonly twelve months, with extra expense for a temporary location

Business income line and period of restoration; confirm the limit reflects royalties that keep accruing.

Workers' compensation and employers' liability

Statutory plus employers' liability of $500K or $1M

Information page of the policy, Part Two limits.

Auto where the store delivers

Hired and non-owned auto of $1M where staff deliver in their own cars; commercial auto with vehicles scheduled where the store owns them

The hired and non-owned endorsement or auto dec page.

Umbrella or excess liability

$1M to $2M following form over general liability, auto and employers' liability

Umbrella dec page and underlying schedule.

Crime and cyber where the brand requires

Employee dishonesty and funds transfer fraud; cyber liability where the franchisee runs the point-of-sale and loyalty systems locally

Crime and cyber dec pages where the manual lists them; many brands run the systems centrally and require only crime.

Certificates and approved carriers

Certificates filed before opening and at each renewal through the franchisor's portal, carriers rated A- or better, notice of cancellation, and the franchisor's right to buy coverage and charge the franchisee if it lapses

The manual's insurance section; a live certificate meets the renewal and notice conditions.

What the franchisor is protecting

A retail franchisor protects the brand across every store: additional insured status on each franchisee's liability policy, products coverage because a product claim reaches the brand, property and business income so a store reopens and royalties continue, and a portal that shows every unit compliant. Minimums sit in the agreement and detail in the operations manual, which can change with notice.

The lines a retail franchise agreement names

General liability with products coverage and the franchisor added. Property on the branded fit-out and inventory at replacement cost. Business income including royalties and marketing fund contributions. Workers' compensation. Auto where the store delivers. An umbrella. Crime, and cyber where the store runs its own systems. Certificates through the portal from approved carriers, with the franchisor's right to buy coverage if yours lapses.

How to check your policies against the agreement

Read the agreement's insurance section and the manual together. Match the general liability limits, the products aggregate and the additional insured form. Check property limits against the fit-out and peak inventory, and business income against rent, royalties and payroll. Confirm workers' compensation, the auto arrangement for deliveries, the umbrella schedule and any crime or cyber requirement. File through the portal before opening.

Keep the certificate current

Franchisor portals expire certificates at each renewal and flag non-compliant units. A live certificate link stays current as policies renew and notifies the franchisor when a line changes, with the official PDF attached, so the store's standing never depends on a forwarded PDF.

Questions people actually ask

Why does the franchisor require products coverage for a store that only resells?

Because a product claim names everyone in the chain of sale, including the store and the brand. Products-completed operations is included on standard general liability forms; the franchisor wants to see the aggregate on the certificate.

Can the franchisor buy insurance for me and bill me?

Most agreements give the franchisor that right if your coverage lapses. It is rarely used but expensive when it is, which is one reason to keep certificates current through the portal.

Does business income have to cover royalties?

In many agreements royalties continue during a closure, so franchisors ask that business income cover them along with rent and payroll. Confirm the limit covers all three for the period of restoration.

Our brand runs the POS and loyalty systems. Do we still need cyber coverage?

Read the manual. Where the franchisor runs the systems centrally it usually carries the cyber exposure and requires only crime coverage of the store; where the store runs them locally, cyber is on the list.