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Compliance Rules and Regulations for Your Franchise

Aug 17, 2007
Successful franchise businesses always need to make sure that they are following the rules and regulations, staying in compliance with the many laws associated with operating a franchise. Franchise systems are a part of a larger corporation, and compliance with the laws and guidelines is essential for sustaining the business and helping it grow. Franchisors will outline all requirements of the franchise, but it is up to the franchisor to find out local rules such as regulations of the premises and building site, state controls, and especially the different types of insurance.

Because franchise agreements also involve different levels of risk, it's important to understand the various types of insurance and regulations involved. Property insurance is required by each franchisor, and this is usually a stipulation of the franchise agreement. The small business loan can help pay for property insurance, so it's important to find out how much this will cost when applying for the initial startup loan.

Workers compensation insurance may, or may not be, required by the laws within your state. The insurance company that you work with for workers compensation must outline in detail what you will be receiving, and how claims will be handled. Life insurance policies may also be required by the franchise company for you and the owners of the business, and this can be factored in to your overall startup costs.

Liability insurance is usually required by each franchisee, and will be stated within the franchise agreement document. This can reach figures of over $1,000,000, so be sure to find out how much is required by the franchisor and contact a lawyer for the best sources of funding.

Some franchises will require a delivery liability clause within the franchise agreement, and this will detail how your drivers standards need to be enforced (if any). If you do not take care of this type of insurance before operations begin, it may cause trouble when hiring delivery drivers and other employees involved with deliveries over the course of business. It's essential to read and understand all the details and clauses of the franchise agreement for these specific areas and caveats.

Franchise agreements identify all the areas that will require compliance during the operations of your new business. It's important to read, understand, and ask your lawyer any questions before proceeding with the agreement, as the risks can be considerably high if you do not obtain the right insurance or information. Franchisors often require different levels of insurance depending on the type of business, and handling these from the start is the best way to stay in compliance.
About the Author
Tristan Andrews writes useful articles about franchises. Discover and explore the world of Franchising. Find out how owning a franchise can expand your financial horizons at http://www.franchise-guide.org/
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