Opening a franchise restaurant comes with a built-in playbook: brand standards, approved suppliers, marketing systems—and an insurance section in your franchise agreement. That section spells out the coverage your franchisor requires you to carry. 

But here’s what trips up many new franchisees: meeting the franchisor’s minimums is not the same as covering your business. The requirements protect the brand. Some of your biggest risks are still yours to manage.

In this blog, we’ll break down the insurance requirements commonly found in restaurant franchise agreements and explain where those requirements end and your own risk begins. 

What Franchisors Typically Require

While every brand’s agreement is different, franchise insurance requirements commonly include:

  • General liability insurance at a set minimum limit
  • Property coverage for the building, equipment, and improvements
  • Workers’ compensation as required by law
  • Liquor liability if the concept serves alcohol
  • Commercial auto if vehicles are used for the business
  • The franchisor named as an additional insured on your policy

That last point matters. Being named as an additional insured helps shield the franchisor if a claim arises at your location — which is exactly why the requirement exists.

Why the Minimums May Not Be Enough

Franchisor requirements are designed to protect the brand’s interests, not to guarantee your individual location is fully covered. Depending on your operation, you may still face exposures the base requirements don’t fully address, such as:

  • Cyber and data breach risk from your POS and online ordering
  • Employment practices claims like harassment or wage-and-hour disputes
  • Business interruption income loss if you’re forced to close
  • Hired and non-owned auto for deliveries and supply runs
  • Higher liability limits than the contract’s floor for real-world claims

A claim that exceeds your limits doesn’t stop at the minimum — the rest can land on you personally. Reviewing your coverage against your actual operations is where an experienced agent earns their keep. See how we approach restaurant coverage and multi-unit and franchise operations.

Reading the Insurance Section of Your Franchise Agreement

Before you sign or renew, look closely at:

  • Required coverage types and minimum limits
  • Additional insured and endorsement language
  • Certificate of insurance deadlines you must meet
  • Approved carriers or rating requirements, if any
  • Indemnification clauses that shift certain risks to you

Frequently Asked Questions

Usually yes, as long as your coverage meets the franchisor’s requirements. Working with an agent who knows the restaurant industry helps ensure you satisfy the contract and protect your own interests.

A lapse can put you in default of your franchise agreement and leave your business exposed. Keeping certificates current and limits in force is essential.

Often, yes. Minimums are a floor, not a recommendation. An agent can help you weigh the right limits for your location’s size and risk.

Cover the Brand and Your Bottom Line

Meeting your franchisor’s insurance requirements keeps you compliant — but building coverage around your actual risks keeps you protected. Reach out to Restaurant Pro Insurance, and we’ll help you satisfy the franchise agreement while making sure nothing important is left uncovered.