FSN Sees Franchisors Target Growth, Bemoan Risk Management
Draw a circle around what you can control, and focus on that. As most Franchisors see, their area of most concern is ‘growing the brand.’ Many franchisors focus on conference attendance, zee development & training, growth strategy, and rightfully so. Any good leader would promote that level of targeted investment of time and energy. As franchisors create sustainable growth through solid business fundamentals and process design, the brand generates momentum. When all the stars align, stratospheric heights can be achieved in relatively short periods of time. If your brand is growing, and at a blindingly fast speed, then so is the Owner’s risk. Risk management isn’t at the forefront of the franchisors’ mind, especially when it comes to early stage franchises. For so many reasons, insurance takes a back seat. As the brand cruises past 15 locations, many early insurance challenges start to surface. Then, before you know it, you have a burgeoning business. In many cases, the culture of risk management wasn’t created early on. Then the pain becomes very real.
This happened to Scott Abott, the founder of 5 Star Franchising, a successful franchisor with multiple successful exits. His brand had an exposure to 3rd party contractor risks. One of the franchisees reported a subcontractor had fallen from a ladder, breaking their back. The subcontractor had an uninsured claim. The lawyers found the brand to be responsible for the claim in the amount of 5M. Yikes! This story is a recurring theme in our industry. The problem is unintentional exposure that puts the brand at risk. Franchisees with even the best intentions struggle with covering their business, let alone being FDD compliant. Franchisors are desperate for a real franchise solution.
Rikor has established themselves as an expert in the franchise insurance space. They are positioned to help franchise brands create a culture of Risk Management with Franchisees. Many franchisors have failed to support an Insurance Compliance program in spite of varsity level efforts. If done right, there would be no time for the franchisor to focus on building the business. FDD compliance is too great of an ask, and the need for additional headcount would be inevitable. Rikor provides a very tangible service offering to offload the demand on administrators to push COI’s.