Many franchise opportunities are available within the U.S. insurance industry. Buying into an insurance franchise puts many small business owners on the path to financial success; however, not all franchising opportunities are as profitable as others. This article will help to guide you through the process of what it takes to start an insurance franchise in the U.S. We've also included a current list of the top insurance agency franchises across the country today.

How an Insurance Franchise Works

An insurance agency can be an independently owned business or part of a larger franchise business. In a franchise, the franchisor successfully establishes a company's brand and business model. Then, they offer licenses to franchisees who want to open an insurance business under the franchisor's established brand name. Franchisees pay the franchisor startup and licensing fees to gain:

  • Operating licenses
  • Access to trademarks
  • Proprietary business knowledge/processes
  • Permission to sell products and/or services

A franchise is a joint venture between the franchisor and franchisee that benefits both parties. Through franchising, a franchisor can increase their market share and spread their business quickly throughout a greater geographical area. The cost to do so is also lower through franchising than if they kept the business to themselves and tried to go it alone. Multiple owner-operated franchise locations also enable franchisors to see greater residual income growth through royalties and other fees. The benefits for a franchisee vary depending on the franchise they chose.

Franchising Pros and Cons

The franchise system provides many benefits to insurance agency owners. For example, a franchisee starts their business with an already proven system that works. The franchise comes with an established brand name, company reputation, and a way of doing business. Most customers already understand the value of the brand and trust that they'll get what they want or need when they enter a franchise business.

Franchisees also receive tools and support from the franchisor so that they can meet the expected standards of the brand. Substantial support of a new business owner ensures greater customer satisfaction, less risk of failure, and an increase in the franchise's profitability. Franchise owners might also help with:

  • Site selection and development
  • Management and team training
  • Marketing and advertising
  • Research and development of new products/services

As with all new businesses, owners are taking a risk when they invest in a franchise. There's no guarantee that your venture will be successful. Other disadvantages include too many rules and guidelines on how you must run your business and ongoing costs you might need to pay to the parent company for things such as licensing, royalties, and advertising.

Insurance Company Options

Insurers can offer a wide variety of insurance products to their clients. The type of insurance agency you decide to open may depend on your interests, skills, and knowledge. Some insurance business opportunities include:

  • Auto insurance
  • Casualty insurance
  • Health insurance
  • Life insurance
  • Homeowner's insurance
  • Disability insurance

If you're unsure which type of insurance policies you would like to offer, take some time to research existing franchises. Look into their offerings, whether they diversify or stick to doing one type of insurance well. Choose the one that seems like the right fit for your situation.

How to Become an Insurance Franchisee

There are many steps to opening your own business in the insurance market, but the franchise you choose will typically help you every step of the way. They want to see you succeed because profits for you = profits for them. Here's a basic look at how the process works, but keep in mind that how you become a franchisee varies depending on the franchise's rules and onboarding methods.

Request Information From the Insurance Franchise

Once you've done your own research into different insurance franchises online, it's time to request further information from the franchise. They typically share the basics on their websites but provide more in-depth details for those who are genuinely interested in opening a new franchise location for the company. The company's website details how to access startup information and usually includes an option to talk to a recruiter live.

Conduct Local Market Research

If you want to open a business in a particular location, you'll first need to conduct some research in that area. Is there a need in the community for the type of insurance agency you want to open? Is there an available location to rent or buy that's easy for potential customers to access? Some franchises will help you with location scouting and development. They may also have strict criteria about where you can operate a business.

Evaluate Startup and Operating Costs

How much it costs to open a new location of a franchise varies widely depending on the company. The U.S. Small Business Administration (SBA) estimates that it costs $20,000 to $50,000 for franchise fees. This startup fee is the price one pays to get a license to own and operate a franchise business. Other startup costs to factor in include equipment, supplies, real estate, insurance, and employee salaries. An initial investment into a franchise can be well over $100,000.

Marketing fees and royalties are additional ongoing operating fees that can cost a franchisee thousands of dollars each year. The amount you pay often depends on your business's revenue and the percentage the franchisor charges.

Submit a Franchisee Proposal

A franchise proposal is a business plan that describes your experience and qualifications to run your own business. The franchise owner reviews your proposal to see if you're eligible to run a franchise business and to evaluate whether you have what it takes to succeed. Your business plan is paramount when seeking investors or applying for more funding to help cover your franchise fees and other startup costs.

Review Franchise Disclosure Documents

A franchise disclosure document (FDD) provides franchisees with important information about the franchise business. It should detail all you need to know about the franchisor, the business, and the franchise agreement you'll sign. The FDD enables you to compare this insurance franchise to others, which helps you to choose the best one for you.

Review and Sign a Franchise Agreement

After reviewing the FDD and securing funding, it's time to consider a contractual agreement with the franchise of your choice. The franchise agreement is a contract between the franchisee and franchisor that sets the terms of the relationship. As it's a highly detailed legal document, it's recommended that you review the agreement with a lawyer before you sign.

Choose a Business Location for Your Insurance Franchise

Now that you're legally ready and financially able to go into business, you can choose a business location from which to operate your insurance company. The amount of freedom you have in choosing the location depends on the stipulations set forth by the franchise owner in your agreement, plus other factors such as traffic, safety, and budget.

Attend Franchisee Training

As part of successful franchise development, all new owner-operators need to attend franchisee training. These classes will help them learn everything they need to know to run the insurance agency. Insurance agents and other new hires are also usually required to attend training. Onboarding varies between franchises, so if you're new to the business, be sure to choose a company that offers the most in-depth training and ongoing support.

Plan and Celebrate Your Insurance Business Grand Opening

Marketing your grand opening is often supported by the franchise owner. Their job is to help introduce you to the neighborhood and to get things going in the right direction. Franchise owners provide marketing guidelines to ensure the brand messaging is consistent throughout the insurance franchise, whether your new business is in California, Texas, or Florida.

Top U.S. Insurance Franchises

According to a recent count of insurance franchises in the U.S., the following franchises are currently the companies with the most locations:

  • Pronto Insurance
  • Fiesta Auto Insurance and Tax
  • Brightway Insurance
  • Estrella Insurance

The number of franchise locations doesn't mean these are the best insurance franchises in which to invest. This data is just one measure of success. Other experts believe that best, top-performing franchises (the ones most likely to give you the best return on investment) are those that meet the following requirements:

  • Average sales of at least $1 million
  • Average profits of at least $100,000
  • Average sales to investment ratio of at least 2:1

Look for these top performance markers and talk to franchising and financial professionals to find the best insurance franchise for you.

Let Skynova Help You With Your Small Business Financial Needs

As a small business insurance agency owner, you might find yourself overwhelmed by all you need to manage on a daily basis. Skynova small business software eliminates piles of paperwork by streamlining your accounting online. We also offer free business templates to help you easily create, send, and organize your documents. Learn more about how Skynova small business tools meet your needs today.

Notice to the Reader

The content within this article is a general guide and may not apply to your specific situation. Always consult with a lawyer and other insurance franchising professionals to ensure you fully understand how to start and operate an insurance franchise.