Rikor CEO Wade Millward Warns Franchisors Not to Fall Behind on FDD Item 8, or Franchise Insurance Gaps Can Hit
Franchise insurance is one of the biggest safeguards for a franchise system. Rikor, a technology-enabled insurance and risk management company focused on franchising, helps franchisors keep their insurance standards current, verify coverage beyond a certificate of insurance and reduce risk across the network.
FranchiseWire sat down with Rikor founder and CEO Wade Millward to talk about Item 8 — the section of the franchise disclosure document (FDD) that outlines required purchases and insurance coverage — and why he believes getting it right is less about compliance and more about care.
FW: You work with franchise brands every day on insurance and risk. What surprises you most when you first look under the hood of a brand’s FDD?
WM: How rarely Item 8 reflects what the brand actually looks like today. I’ll sit down with a franchisor who has built something genuinely impressive — strong operations, great franchisee relationships, real systems — and then we look at the insurance requirements together and they were written five, sometimes seven years ago. The brand has added service lines, expanded into new states, franchisees are using subcontractors they weren’t using before. And the FDD hasn’t moved. There is outdated FDD language.
Nobody did anything wrong. It just lives between departments. Legal drafts it, operations doesn’t feel like it owns it, and franchise development doesn’t raise it during sales conversations because higher requirements can feel like friction at the wrong moment. So it sits.
FW: And that creates real exposure?
WM: Outdated FDD language creates a gap between what franchisees think they have and what they actually have when a claim hits. Those aren’t always the same thing. A franchisee follows the FDD requirements exactly, buys a policy that checks every box on paper, and then something happens — a bodily injury, a subcontractor incident, an employee situation — and the coverage doesn’t respond the way anyone expected.
That’s the moment that matters. And by then it’s too late to fix the requirements.
FW: What does that actually look like for a franchisee when it goes wrong?
WM: It gets personal fast. Defense costs start climbing. The franchisee’s carrier denies the claim based on an exclusion nobody caught during onboarding. Now they’re paying out of pocket for legal defense on something that should have been covered. Royalties fall behind. The relationship with the franchisor strains — not because anyone acted in bad faith, but because the system that was supposed to protect this person had a gap.
One of the most common culprits is something called a classification limitation endorsement. It’s a policy provision that restricts coverage to the specific operations the carrier priced when they underwrote the risk. When a franchisee expands into an adjacent service — even slightly — that exclusion can activate. And it never shows on the certificate of insurance. The COI is a summary document. It tells you a policy exists. It tells you almost nothing about whether that policy will actually perform.
FW: You mentioned the certificate of insurance. That’s the standard verification tool for most brands, right?
WM: It is, and it’s a reasonable starting point — but most brands treat it as the finish line. A certificate of insurance (COI) is a snapshot. It reflects what the policy looked like when the certificate was issued. It doesn’t tell you whether the policy renewed, whether the franchisee changed carriers mid-year, whether the additional insured endorsement is the right form, or whether the umbrella extends over all the underlying policies.
None of that is visible on the certificate. The brands building real protection into their systems have taken the next step — collecting actual policies or at minimum the declarations pages and key endorsements, building renewal tracking, creating subcontractor insurance standards. Treating it as a repeating process rather than a one-time onboarding task. It’s not complicated. It just requires someone to own it.
FW: That ownership question seems like the crux of it.
WM: It really is. And I’d push further — the team that owns it matters as much as the fact that someone does. Legal should review it, but operations should drive it. Operators think about what franchisees actually face day to day. That perspective is what keeps the requirements grounded in reality rather than just legally defensible on paper.
FW: Let’s talk about the franchisee side of this. How much do franchisees typically understand about what they’re buying?
WM: Honestly, not much — and that’s not a criticism, it’s just reality. They’re operators. They found a broker, submitted the COI to satisfy the requirement, and moved on. Most franchisees don’t know what an additional insured endorsement does in a lawsuit. They don’t know the difference between occurrence and claims-made coverage. They trust that if they follow the FDD, they’re covered.
That trust is the whole point of the franchise relationship. Which means the requirements carry a real responsibility proportional to the confidence franchisees place in them.
FW: So what are the brands doing well actually doing differently?
WM: They’ve built an educational layer into onboarding. Not just “here are the requirements” but “here’s why each one exists and what it protects you against.” They walk franchisees through what happens when a claim is filed. They make insurance a real operational conversation — something worth understanding, not just paperwork to clear before opening day.
That changes behavior. A franchisee who understands why the additional insured requirement exists is far more likely to verify the endorsement is actually on the policy rather than assuming. A franchisee who understands how subcontractor claims work is more likely to actually check subcontractor coverage. Education produces better-protected franchisees. That’s what everyone is after.
FW: If a franchisor is reading this and wants to take a hard look at their Item 8, where do they start?
WM: Start with an honest audit of what you’re requiring against what your brand actually looks like operationally today. Map the real exposure profile of a franchisee in your system. What do they do? Who do they employ? Do they use subcontractors? Do they work in customers’ homes? Do they handle equipment or chemicals? Do they collect customer data? Every affirmative answer is a coverage line that needs to be in the requirements with enough specificity to produce a consistent result across your broker network.
Then look at endorsement language, not just limits. Specifying that the additional insured endorsement must use ISO form CG 20 10 or equivalent, and that it must include completed operations, is materially different from requiring “additional insured status.” The latter produces dozens of different interpretations. The former produces a consistent policy result. That precision is the whole point.
And then stress-test your limits against current claim severity in your vertical. The RAND Institute for Civil Justice publishes verdict trend data that makes this a concrete exercise. The question is whether your required umbrella absorbs a realistic worst-case claim or runs out before the verdict is satisfied.
FW: You’ve framed this less as a compliance issue and more as a care issue. That’s a different way to think about it.
WM: Because I think the compliance framing is actually part of why it gets neglected. If Item 8 is just a legal obligation, it belongs to legal and nobody else is paying attention. If it’s a service you provide to people who bet their livelihood on your brand, it belongs to everyone.
When someone signs a franchise agreement, they’re trusting that the system was built with their success in mind. The operations manual, the training, the supply chain — all of it. Outdated FDD language can hurt a franchise system. Item 8 is part of that system. It deserves the same care as everything else.
To learn more about franchise insurance, visit the Rikor website.
