Press Releases

Franchising. Could It Be An Option For Your Agency

BROOKE FRANCHISE CORPORATION

Perhaps the most widely known of the insurance franchise entities, Brooke is a familiar name to most agency owners. We contacted Shawn Lowry, Brooke Franchise Corporation president to find out what they have to offer agents looking for a franchise opportunity.

According to the Brooke website, “We believe franchising is saving the independent insurance agency industry. The number of total independent insurance agencies is diminishing while the number of independent insurance agency franchises is rapidly growing.”

Lowry explained that Brooke’s goal is to surpass 1,000 locations by 2007, with most of its growth coming today from “organic start up and development franchises,” in which the company sets up an office and recruits a franchisee to the location. Of course, Brooke is well-known for acquiring and converting existing agencies. The company currently has franchises in 25 states and is the 22nd largest insurance agency in the country.

We asked Lowry what was involved in a producer establishing a franchise. Does Brooke more or less take over an existing agency or do they offer more of a partnership, or both? He explained: “In the early days our franchises were mainly conversions of existing books of business. Within the last 2 years our primary growth has come from producers who are tired of building wealth for another agency owner and come to Brooke to start their own book of business from scratch.”

As far as a non-agency owning producer getting involved as a franchisee, Lowry commented that is the basis for its “Start up program” which is the fastest growing sector of Brooke’s franchise model.

According to Lowry, the initial franchise fee is $165,000 per location. Brooke Credit Corporation (finance subsidiary of Brooke Corporation) typically provides 100% of the financing because of their niche understanding of the insurance industry. Brooke Credit also provides financing to Allstate agents and they do financing in the funeral home industry as well. In addition to basic franchise services, Brooke provides franchisees with access to a network of numerous vendor relationships from advertising assistance to payroll administration, legal consultation, access to additional credit, insurance company product access, agency management software, etc.

L.A.INSURANCE The LAAA also spoke with Raffi Muschegian, L.A. Insurance’s Territory Developer for the State of California, who explained that L.A. Insurance was opened in 1992 as a successful single agency, and was not originally formed as a franchise model. Currently, there are 150 franchises in five states, with California registration nearing completion at press time.

The L.A. Insurance website states that “today the L.A. Insurance Agency is the largest independent insurance agency in the state of Michigan with over 140 outlets in Michigan and more recently Nevada and Arizona. L.A. Insurance has carved a niche as the premier walk-in, retail store front insurance agency in Michigan and soon across America.” The website also notes that “recently, L.A. Insurance Agency launched a new franchise program with franchises available in select states and territories.”

We asked Muschegian whether they take over an existing agency or do they offer more of a partnership. He said that there are both types of opportunities, and non-owners are also welcome to explore an L.A. Insurance franchise. He said that he plans on “growing to a national level by adding markets and territories of development.”

Unfortunately, there is really nothing on the L.A. Insurance website specifically discussing the franchise model. However, Muschegian did explain that franchisees are not employees and retain ownership of the business. They are “business owners (who are given) the guidance they need to be successful.” For the $10,000 franchise fee, Muschegian said that “the franchisee receives appointments, training and unlimited company support. We provide guidance and support in every aspect of opening and operating their agency. With many companies we often are able to negotiate higher commissions than a single agency owner.”

There were some similarities between the three. All are licensed franchisors, although L.A. Insurance is still registering with the state of California. Franchisees are not employees of the company. Apparently, this would be in violation of state and federal statutes. The business belongs to the franchisee, transferable to the company at the termination of the franchisee contract.

Bear in mind that the preceding information was furnished to the LAAA by the franchise entities themselves. As with any business agreement, any potential franchisee is strongly encouraged to consult an attorney to review any documents before any commitment is made, as well as do some investigating of their own. Also, this short list of franchisors should not be construed as exhaustive.

With the marketing going through some significant changes, franchising should be considered a viable option. Despite the best efforts of agency owners, sometimes the future of any insurance career will include a franchise. There are many advantages – financial backing, advertising support, office management, etc. Drawbacks could be loss of autonomy and control. It’s a tradeoff that individual producers need to weigh for themselves. Nonetheless, whether you if you decide to still remain independent or go for a franchise, the LAAA remains your loyal source of relevant information, networking, innovation, and management.