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Franchisor reduces supply chain risks

A reputable Canadian franchisor with global operations centralizes risk management (incl. tailored insurance protection) across its franchisees, reducing overall supply chain risks, facilitating growth of its franchisee network, and improving its financials and risk profile to lenders.

Challenge

Shareholders of a Canadian food & beverage franchisor were challenged when several of their franchisees endured operational losses that were not covered by their insurance. Such franchisees would in turn lean on the franchisor for a solution. The franchisor wanted to solve this problem quickly to ensure a strong reputation amongst current and prospective franchisees.


Discovery

After discussions and analysis with key shareholders and Management, we formed an Operational Risk Profile for the franchisor according to which we implemented our proprietary methodology to structure insurance for the franchisor and its franchisees. This entailed building a centralized risk management and insurance solution for the franchisees.


Impact

  • The Franchisor’s Total Cost of Risk dropped significantly, improving its risk profile to lenders and investors.
  • Reputation amongst existing franchisees remained intact as the centralized solution meant better protection all while achieving cost savings.
  • Prospective franchisees were attracted by the centralized risk management/insurance approach, translating into ‘easier’ growth in the number of franchisees.
  • The franchisor was able to reduce premium by over 25% on one of its insurance products, of which a portion was reinvested in operational risk management.
  • The franchisor receives ongoing advice and quarterly updates on its operational risks and structured insurance products to maintain consistently strong operational risk management.
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