In today’s economy, business-minded individuals are considering their options for greater profitability. One such business endeavor that may prove wise for investors is the insurance franchise business. With the uptick in coverage needs, this could prove to be a lucrative opportunity.
You may be wondering, though, are insurance franchises a good investment? You can make the best decision by understanding what is involved in this type of opportunity.
What Is an Insurance Franchise About?
An insurance franchise is simply an established insurance company offering the ability for people like you to open and operate a similar business under its name. Franchises consist of the company name, branding, equipment, and expertise. When considering the question “Are insurance businesses good franchise opportunities,” it’s important to remember that if you choose this path, you can be up and running with very little transitional time.
How to Start an Insurance Franchise
You might not know where to begin when it comes to starting your own insurance franchise. The following guidelines should aid you in moving forward with your plans.
Learn About the Best Insurance Franchises
When securing an already-established business franchise, you want to be sure you obtain the best one. This means you need to research the industry and the company. There is no use in opening a branch if the company doesn’t have the branding and reputation to optimize its ROI. One of the factors that propels the new owner to success is purchasing an entity with a known name. The best franchisor to partner up with is one that people trust and has years of experience.
Consider the Startup and Operating Costs
After you find the best insurance franchisor, it’s time to assess the startup and operating costs. Some people fear that owning a location will be too costly to operate. They may have heard that the startup costs are astronomical. However, that all depends on what type of franchise you purchase. Some franchises do have much higher expenses to get started and operate. For example, a fast-food establishment can have a lot of upfront costs due to the many needed supplies.
While a person can purchase many other types of franchises, insurance franchise opportunities are optimal. They are a simple yet profitable business and won’t have much overhead expenses like many other franchises. You won’t have many of the startup and ongoing overhead costs that you do with something like a restaurant.
Some common startup costs you may incur include:
- Real estate
- Property upgrades and improvements
- Office furniture
- Equipment
- Supplies
- Training
You will also have operating expenses, such as:
- Utility costs
- Insurance
- Marketing
- Licenses, if applicable
- Wages
Finally, you have the cost of using the franchisor’s name. You will usually pay an initial upfront fee and then ongoing royalties. The amount of royalties will depend on the agreement you make with the owner.
Review the Franchise Agreement and Disclosure Documents
Before you close the deal to owning your own franchise, you must assess the franchise agreement and disclosure documents. These legal documents will provide you with an outline of what your purchase agreement entails.
Franchise Disclosure Document (FDD)
A franchise consists of a license that one party acquires from the franchisor. This license allows the purchasing party (franchisee) to have access to the business’s proprietary knowledge, brand logos, trademark, and way of doing business. That doesn’t mean they can’t put their own personal touches on how they operate it. However, the disclosure documents outline any restrictions or regulations you must follow.
The FDD consists of a comprehensive overview of what the parties can expect. It explains each party’s role and how the store will work. For example, any brand requirements the franchisee must follow will be outlined in the FDD. Additionally, how the investment will work in practicality is outlined, giving the franchisee an idea of what to expect. The FDD helps you do your due diligence before closing the deal with the franchisor.
Franchise Agreement
The franchise agreement is the actual contract that spells out the details of your agreement. This document also allows you to operate the business under the franchisor’s name, using their trademark and branding logo. Once all parties sign, the franchisee is ready to operate the business by selling goods and/or services.
In exchange, the franchisee gives the franchisor a one-time payment or, in some cases, periodical payments. They will also pay the franchisor a cut of the profits. All of this is determined between the parties and written out in the agreement.
How to Be Profitable with An Insurance Franchise
Being successful in the insurance franchise business is crucial for profitability. Here are things to consider as you optimize your ROI.
Cross-Sell Insurance Products
Cross-selling and upselling are common techniques used in many industries. It involves selling the customer more than one item, usually one complementary to their purchase. In this industry, this would consist of trying to sell more than one policy to the customer. For example, if they already have auto coverage through you, you can try to sell them a home policy.
Adapt to the Industry Changes
Numerous world changes could impact an insurance franchisee. By being up to date on these issues, you can meet the demands and even leverage these in your favor. For example, since climate change conditions are ramping up and causing more extensive damage in some places, you can provide more customized coverage packages for clients.
Assess and Evaluate
Being a successful franchisee requires due diligence before making the purchase and doing regular assessments after you acquire your new business. Be sure to schedule periodic evaluations of how your company is performing. This will ensure that you stay on track, adjusting as you go.
Get Started with an Experienced Insurance Franchisor
Starting an insurance franchise is a great way to make a living. First, it’s vital to select a brand that is worth purchasing. Confie has one of the largest and most reputable personal lines of insurance in the United States. Join us or find out more information by contacting us directly. You can contact us today by calling (714) 252-2500.
