The Importance of Scale and Purchasing Power in Franchises

There are several million rea$on$ why every franchisor needs to reevaluate their risk mitigation strategy now - at least that's what I learned from Wade Millward, of rikor.io in this episode of The Advisory Board Podcast.

We also focused on how franchisors can create a culture of risk mitigation within a franchise system.

Key takeaways include:

- There is key language every Franchise system needs in its FDD about insurance that is missing 70% of the time.
- Franchisors assume vicarious liability for their franchisees when they begin franchising. Ultimately, this means underinsured franchisees create liability issues for franchisors.
- With compliance often being such a manual task it's often burdensome and overlooked, which can put many franchise systems at risk.
- One of the first things private equity and purchasing entities will check when evaluating a franchise system for acquisition is their insurance compliance. When they find franchisees are out of compliance, the purchase multiple gets reduced.