Leading broker, Moreland Insurance, a long-term British Franchise Association affiliate adviser, has warned the UK’s franchisor community that their businesses can be irretrievably damaged as a result of costly legal claims from franchisees.

 

A number of recent cases have seen franchisees successfully claim that they have been induced into purchasing franchises by misrepresentation and, as a result, have been awarded substantial financial awards by the courts.

 

Maurice Logie, director of Moreland Insurance, said: “Damages pay-outs are only part of the story; the accompanying legal costs can make the overall financial blow really quite devastating.

 

“Franchisors, often through no fault of their own, can find themselves at the mercy of legal suits from unsuccessful or disaffected franchisees and unless they have taken steps to protect themselves through having suitable insurance cover in place, can see their entire business undermined.

 

“Since the outcome of a recent case where a franchisee was awarded £149,000 plus substantial costs, we have had an increasing number of enquiries from franchisors seeking Damages and Legal Costs and Expenses cover which provides financial protection and peace of mind for the business owner.

 

“Such policies don’t simply cover the legal costs but the entire cost including damages and strengthen significantly the ability, and confidence of franchisors to conduct a robust defence against mischievous claims.”