Icon Law offer franchise advice for franchisors in times of natural disasters

Natural disasters such as floods can displace people, damage property and interrupt business operations. Franchisors need to consider some of their responsibilities and the affects this can have on their franchises.

Most insurance policies exclude liability for property damage or any loss directly or indirectly caused by flood damage.

Existing fixed costs may not be covered under business interruption insurance. This type of insurance only covers profits lost while the business is closed.

Power and services supply for businesses are most often disconnected in the event of a flood. Most leases contain an exclusion of liability of the landlord when services to the premises are cut due to a natural disaster.

Under the lease agreement, landlords and authorities have the right to restrict access to the premises and franchisors may not be able to resume business until authorities advise they are allowed.

Shopping centre and building management are responsible for coordinating the removal of debris and damaged property and require franchisors and other centre staff to assist.

Due to the nature of contamination and debris, emergency workplace health and safety restrictions may be imposed by authorities in addition to normal workplace health and safety guidelines.

Supply of some goods and services will most likely be affected in the event of a flood and business owners need to communicate this to customers to avoid complaints and disappointment.

Franchisors that reserve the right to control the appointment of approved suppliers may have to appoint alternative suppliers where existing supply chains have been temporarily interrupted or permanently ceased. Logistics for delivery may become difficult or impossible in cut off areas.

This is a guide to assist understanding, in simple terms, some of the legal issues and terms a franchisor may encounter in the case of a natural disaster. It is not specific Icon Law .