Franchise insurance compliance is a two-sided requirement: the franchisor sets requirements (and must disclose them in the FDD), and then must verify that franchisees actually meet those requirements. Most franchise systems do the first part reasonably well. The second part-systematic verification at scale-is where the $500,000+ uninsured incidents occur.
This checklist covers both sides: what to require, and how to verify it.
Part 1: FDD Item 8 Disclosure Checklist
Before finalizing your FDD, confirm the following are accurately disclosed in Item 8:
Required Coverage Types
- Commercial General Liability is disclosed with required limits
- Products/Completed Operations is disclosed (if applicable)
- Commercial Automobile is disclosed with required limits
- Workers' Compensation is disclosed as required by statute
- Employers' Liability is disclosed with required limits
- Umbrella/Excess Liability is disclosed with required limits
- Business Interruption / Loss of Earnings is disclosed (if required)
- Employment Practices Liability is disclosed (if required)
- Liquor Liability is disclosed (if applicable to franchise type)
- Professional Liability is disclosed (if applicable)
- Any franchise-type-specific coverage is disclosed
Additional Insured and Endorsement Disclosures
- Disclosure states that franchisor must be named as additional insured
- Disclosure specifies any required endorsement forms (CG 20 10, CG 20 11, etc.)
- Disclosure states whether primary and non-contributory language is required
- Any other parties required to be named as AI (landlord, lender) are disclosed
Carrier Requirements
- AM Best minimum rating is disclosed
- Admitted vs. surplus lines carrier policy is disclosed
- Any approved carrier list is disclosed (if maintained)
Modification Rights
- Disclosure states whether franchisor can modify requirements and by what process
- Disclosure is consistent with franchise agreement terms
Part 2: Franchise Agreement Insurance Requirements Reference
Typical minimum requirements by franchise category for 2026:
Food Service and Restaurant Franchises
| Coverage | Minimum Limit |
|---|---|
| Commercial General Liability | $1M per occurrence / $2M aggregate |
| Products/Completed Operations | Included in GL aggregate |
| Liquor Liability | $1M per occurrence (if alcohol served) |
| Commercial Auto | $1M CSL |
| Workers' Compensation | Statutory |
| Employers' Liability | $500K per accident / per employee / policy |
| Umbrella | $3M-$5M over GL, auto, employers' liability |
| Employment Practices Liability | $1M per claim (recommended) |
| Commercial Property | Replacement cost |
Retail and Service Franchises
| Coverage | Minimum Limit |
|---|---|
| Commercial General Liability | $1M per occurrence / $2M aggregate |
| Commercial Auto | $1M CSL |
| Workers' Compensation | Statutory |
| Employers' Liability | $500K per accident |
| Umbrella | $2M-$3M |
| Employment Practices Liability | $1M per claim |
Home Services Franchises (Cleaning, Landscaping, Repair)
| Coverage | Minimum Limit |
|---|---|
| Commercial General Liability | $1M per occurrence / $2M aggregate |
| Completed Operations | $1M (included in GL) |
| Commercial Auto | $1M CSL |
| Workers' Compensation | Statutory |
| Employers' Liability | $500K per accident |
| Crime/Dishonesty | $25K-$50K |
| Umbrella | $2M |
Fitness, Wellness, and Healthcare Franchises
| Coverage | Minimum Limit |
|---|---|
| Commercial General Liability | $1M per occurrence / $2M aggregate |
| Professional Liability (E&O) | $1M per claim |
| Sexual Misconduct Liability | $1M per claim (critical) |
| Commercial Auto | $1M CSL |
| Workers' Compensation | Statutory |
| Umbrella | $3M-$5M |
Part 3: Franchisee COI Verification Checklist
Use this checklist when reviewing each franchisee's submitted certificate:
Pre-Review Setup
- Franchise agreement retrieved and insurance requirements identified
- State-specific requirements noted (if applicable)
- Previous certificate on file reviewed for any changes that need to be confirmed
Named Insured
- Named insured on COI matches the franchisee entity in the franchise agreement
- Entity type is correct (LLC, Inc., partnership as applicable)
- If franchisee has multiple entities: confirm which entity is operating this location
Coverage Types Present
- All required coverage types are listed on the COI
- No required coverage type is absent from the certificate
Coverage Limits Comparison
| Coverage | FA Requires | COI Shows | Compliant |
|---|---|---|---|
| GL Per Occurrence | ☐ | ||
| GL Aggregate | ☐ | ||
| Auto | ☐ | ||
| Employers' Liability | ☐ | ||
| Umbrella | ☐ | ||
| EPL (if required) | ☐ | ||
| Liquor (if required) | ☐ | ||
| Other: | ☐ |
Certificate Holder
- Franchisor entity (correct legal name) is in the certificate holder box
- Franchisor address is correct and current
Additional Insured Verification
- AI reference appears on the COI (description or dedicated field)
- Specific endorsement form referenced (CG 20 10 / CG 20 11 / other)
- AI endorsement is attached to the certificate submission
- Endorsement names the correct franchisor entity (exact legal name)
- Endorsement specifies primary and non-contributory coverage
- Endorsement covers completed operations (if required by FA)
Waiver of Subrogation
- WOS indicated on COI for GL line
- WOS indicated on COI for WC line
- WOS endorsement is attached to submission
- WOS endorsement is in favor of the franchisor specifically
Policy Quality
- Carrier AM Best rating is A- or better
- Carrier is admitted in the state of the franchise location
- Policy effective date covers current and future operations
- Policy expiration date is logged; renewal reminder set
Compliance Determination
- Overall status: Compliant / Minor Gaps / Material Gaps
- Each gap documented with: required value, submitted value, gap description
- Deficiency notice sent if any material gaps identified
- Review logged with date, reviewer, and findings
Part 4: Annual Compliance Audit Checklist
At least once per year, conduct a system-wide compliance audit:
- All active franchise agreements have current COIs on file
- All current COIs have been reviewed against agreement requirements (not just filed)
- All deficiencies identified in the prior year have been resolved
- Upcoming expirations in the next 90 days have been identified
- Renewal outreach has been sent or scheduled for all expiring certificates
- Compliance rate by region and system-wide has been calculated
- Compliance trend vs. prior year has been analyzed
- FDD Item 8 requirements have been reviewed against current standards
- Any required FDD updates have been addressed in the annual revision
Frequently Asked Questions
Q: How do we handle multi-unit franchisees who operate several locations under different entities? A: Each operating entity requires its own policy and certificate. A holding company policy may cover multiple entities if structured correctly-but confirm with the franchisee's broker that each operating location is covered under the policy's named insured structure. Don't assume.
Q: Should we require proof of insurance before a franchisee opens, even if the opening is months away? A: Yes-but the coverage effective date should align with when the franchisee begins operating. Requiring a COI for the forthcoming opening with an effective date matching the opening date confirms coverage planning is underway. Require a confirmed active COI with no prior gap the week before opening.
Q: What's the consequence to the franchisor if we require insurance but don't verify it? A: A franchisor who requires insurance but doesn't verify it faces the full risk exposure that the insurance requirement was designed to prevent-because non-compliant franchisees may not actually carry adequate coverage. Additionally, courts in some jurisdictions have found that a franchisor who requires insurance without enforcing it cannot rely on contractual indemnification provisions when coverage is inadequate.
Q: Can we use a master insurance program instead of requiring franchisees to obtain their own policies? A: Some franchise systems use franchisor-sponsored insurance programs where all franchisees are covered under a master policy. This simplifies compliance but requires careful program design, premium cost allocation, and FDD disclosure. Consult with a franchise attorney and insurance broker experienced in franchise programs.
Bramble automates the verification steps in Part 3 of this checklist-reading franchise agreements, comparing them to franchisee COIs clause by clause, and producing specific compliance reports for every location in your system.