Is business insurance a required expense for Management Recruiters franchisees?
Management_Recruiters Franchise · 2024 FDDAnswer from 2024 FDD Document
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You have an ongoing required expense for business insurance premiums. The premiums vary depending on revenue in your business, your credit rating, and the type of payment schedule you choose. We do not require members to provide us with expense information and cannot determine what percentage this will be of your ongoing costs, but the average annual costs for $0 to $500,000 in revenue is $1,750, $500,000 to $1,000,000 is $2,250, $1,000,000 to $2,000,000 is $3,000. Anything above $2,000,000 in revenue must be determined by an underwriting review. You are required to have the following insurance coverage:
- COMMERCIAL GENERAL LIABILITY including bodily injury and property damage liability for premises and operations, contractual liability, personal injury liability and, if applicable, stop gap coverage in the amount of $1,000,000.00 each occurrence and $2,000,000.00 annual aggregate;
- BUSINESS AUTOMOBILE LIABILITY if Franchisee is a corporate entity that owns a vehicle: including bodily injury and property damage liability for owned, leased, non-owned, and hired autos used in the Franchise Business in the amount of $1,000,000.00 each accident;
- WORKERS' COMPENSATION with the statutory minimum limits set by applicable Law, unless the Laws of Franchisee's state do not require this coverage for sole proprietors;
- EMPLOYER'S LIABILITY in the amount of $500,000.00 or statutory minimum limits, whichever is greater;
- PROPERTY including "all-risk" coverage on all real and personal property owned, leased, or rented by Franchisee as well as business income and extra expense coverage. This insurance
shall be written for the replacement cost of Franchisee's real and personal property and on an actual loss sustained basis for the business income and extra expense;
- ERRORS AND OMISSIONS in the amount of $1,000,000.00 per claim and annual aggregate;
- EMPLOYMENT PRACTICES LIABILITY in the amount of $1,000,000.00 per claim and annual aggregate. This insurance is required regardless of whether or not Franchisee has employees;
- COMMERCIAL BLANKET EMPLOYEE DISHONESTY BOND including coverage for any ERISA plans in the amount of $100,000.00 or 10% of the ERISA plan assets, whichever is greater, if Franchisee has employees;
- LICENSE BOND if required by applicable Law;
- UNEMPLOYMENT COMPENSATION with the statutory minimum limits set by applicable Law unless Franchisee is a sole proprietor and the state Law in Franchisee's state does not require this for sole proprietors.
- Any and all other types and limits of insurance that may be required, from time to time, by F
Source: Item 8 — RESTRICTIONS ON SOURCES OF PRODUCTS AND SERVICES (FDD pages 26–29)
What This Means (2024 FDD)
According to Management Recruiters's 2024 Franchise Disclosure Document, business insurance is a required ongoing expense for franchisees. The premiums for this insurance will vary based on several factors, including the revenue of the business, the franchisee's credit rating, and the chosen payment schedule. While Management Recruiters does not collect expense information from its members and therefore cannot determine the exact percentage this expense will represent of ongoing costs, the FDD provides average annual costs based on revenue ranges. For businesses with revenue between $0 and $500,000, the average annual insurance cost is $1,750. For revenue between $500,000 and $1,000,000, it's $2,250, and for revenue between $1,000,000 and $2,000,000, it's $3,000. Revenue above $2,000,000 requires an underwriting review to determine the premium.
Management Recruiters requires franchisees to maintain specific types and levels of insurance coverage. These include Commercial General Liability with $1,000,000 per occurrence and $2,000,000 annual aggregate coverage, covering bodily injury and property damage. If the franchisee is a corporate entity owning a vehicle, Business Automobile Liability insurance with $1,000,000 coverage per accident is required. Workers' Compensation is mandated with statutory minimum limits, unless state laws exempt sole proprietors. Employer's Liability insurance is required at $500,000 or statutory minimum limits, whichever is greater. Additionally, franchisees must have Property insurance covering all real and personal property, including business income and extra expense coverage, written for the replacement cost of the property.
Beyond these standard coverages, Management Recruiters also mandates Errors and Omissions insurance at $1,000,000 per claim and annual aggregate, as well as Employment Practices Liability insurance, also at $1,000,000 per claim and annual aggregate, regardless of whether the franchisee has employees. A Commercial Blanket Employee Dishonesty Bond is required if the franchisee has employees, covering ERISA plans at $100,000 or 10% of the ERISA plan assets, whichever is greater. A License Bond is required if mandated by applicable law, along with Unemployment Compensation with statutory minimum limits, unless the franchisee is a sole proprietor and state law does not require it. Management Recruiters retains the right to require additional types and limits of insurance as needed, or as required by applicable law.
Prospective franchisees should carefully consider these insurance requirements as part of their overall financial planning. The specific costs will depend on their individual circumstances, including revenue, credit rating, and location. It is advisable to obtain quotes from multiple insurance providers to ensure competitive rates and adequate coverage. Understanding these requirements is crucial for budgeting and managing the ongoing operational costs of a Management Recruiters franchise.