Buying a Franchise in Egypt: Review Insurance and Indemnity Clauses

When buying a franchise in Egypt, the insurance clause may seem like an administrative detail to deal with after choosing the brand and fitting out the premises. Yet it raises a fundamental financial question: who pays if a customer is injured, a product causes harm, or a claim extends to the franchisor? In franchising, a brand’s promise to provide a safe operating system is not enough. You need to understand the relationship between your contractual liability and the insurance cover you can actually buy.

Separate insurance from your obligation to indemnify the franchisor

An insurance policy is a contract with an insurer, whereas an indemnity clause in a franchise agreement creates an obligation between you and the franchisor. The latter may be much broader than the former. If you agree to cover ‘all claims relating to the outlet’, that does not mean your insurer will pay everything the franchisor demands from you.

Look for wording that requires you to cover legal fees, defence costs, settlements and losses arising from the actions of employees or suppliers. Ask whether the clause requires your liability to be established, or whether a claim against the franchisor alone is enough to trigger it. Does the franchisor take responsibility for its own mistakes, or is it trying to pass the consequences on to you?

For example, harm might result from poor storage at the outlet, or from a defect in a product delivered sealed by an approved supplier. The apparent outcome is the same, but the cause of the harm and the party able to prevent it are different. Ask for responsibility to be allocated according to the cause of the incident and each party’s role, rather than accepting wording that makes the outlet owner responsible for everything simply because the sale took place there.

Understand Egypt’s legal framework and the limits of contractual protection

Egypt has no standalone franchise law, mandatory franchise-specific disclosure regime or dedicated authority for registering franchise agreements. That does not place the relationship outside the law: general obligations are governed by Civil Code No. 131 of 1948 and, depending on the nature of the agreement, the provisions of Commercial Law No. 17 of 1999.

For insurance, Unified Insurance Law No. 155 of 2024 sets the general framework for insurance activities. Customers’ rights and the obligations of suppliers of goods or services are also affected by Consumer Protection Law No. 181 of 2018, alongside sector-specific rules. Simply calling an agreement a ‘franchise’ does not trigger a standard insurance policy requirement for every business. Legal, licensing and contractual requirements must be checked case by case.

It is important to distinguish between allocating responsibility between the parties and the rights of an injured party. An agreement that the franchisor will bear the cost of a particular claim does not necessarily prevent a customer from pursuing you under the law. You may first need to deal with the claim and then seek recovery from the responsible party. Ask an Egyptian lawyer to review the enforceability of indemnity clauses, limitations of liability and any attempt to exclude liability for fault.

Check that cover is available before accepting the obligation

Send the draft insurance requirements and indemnity clause to an insurer or licensed broker before signing. Request a written response explaining what can be covered, what is excluded and which conditions could prevent a claim from being paid. A quotation alone is not evidence that the policy meets the agreement’s requirements.

Discuss cover suited to the business, without assuming that every venture needs the same package:

• Property and equipment: Which risks are covered, and on what basis are assets valued?
• Public liability: Does the cover include injuries to customers and damage to their property at the outlet?
• Product liability: Does it cover harm caused by products you sell or prepare, and what exclusions apply?
• Business interruption: What event triggers cover, and which expenses or losses are included?

Also review the excess you must pay yourself, the limit of indemnity for each incident and the aggregate limit over the policy period. Check whether defence costs reduce the available limit or are treated separately. These details can leave a cash shortfall even when valid insurance is in place.

If the franchisor asks to be named as an additional insured, request confirmation that this is possible and clarify the scope of protection it provides. Do not assume that the franchisor’s global insurance covers your Egyptian company or premises. Ask for a policy or endorsement confirming the cover and its limits.

Negotiate how claims are managed, not just their value

Your review should go beyond asking, ‘How much will I have to pay?’ Establish who receives notice of an incident, who notifies the insurer, who appoints the lawyer and who has authority to agree a settlement. One party might agree to a commercial settlement to protect its reputation, while the policy requires the insurer’s consent before admitting liability or making a payment.

Ask for the claims procedures in the franchise agreement and insurance policy to be aligned. Negotiate provisions so that neither party has to bear the cost of a settlement agreed unilaterally by the other without a clear approval process, while observing legal deadlines and procedures. Define duties to preserve evidence, co-operate and exchange documents, particularly where the outlet, franchisor and supplier disagree over the cause of an incident.

Include insurance premiums, excesses and a reserve for uninsured risks in your purchase budget. Ask how cover requirements may be changed later, who bears any increase in cost and how much time you will have to comply.

Practical takeaway: Do not sign a broad indemnity undertaking based on a promise that ‘insurance will cover it’. Combine your lawyer’s review with written confirmation from the insurer, then address any gaps in the agreement and your budget before paying the franchise fee.