A Study in Risk
Having appropriate insurance is a must in the restaurant industry. Here are some of the key risks in today’s restaurants and cafes, and advice about coverage best suited to the industry.
Risk one: Fire damage
Policy type needed: Property damage
Cafes and restaurants that cook on-site are susceptible to fires, particularly from grease, oil and electrical sources.
The risk of fire damage depends on the type of cooking carried out, the equipment used and the construction of the premises. For instance, a cafe serving prepared sandwiches and drinks has a much lower risk than a fish and chips shop with large deep fryers, grills and exhausts that attract grease.
A property damage contents policy can cover the cost of replacing your business assets and stock in a fire and from other perils such as rain, wind and hail storms. It can also cover the damage to the actual building, if you own the property.
It is important to cover the full cost of replacing your entire contents and stock or you run the risk of underinsuring. This can be a costly and – with some agent advice – easily preventable mistake.
Risk two: Equipment breakdown and food spoilage
Policy needed: Equipment breakdown
Cafes and restaurants are reliant on their cooking and refrigeration equipment for trade. Business owners need to be prepared in the event these machines unexpectedly fail.
Property policies include insurance for business contents and stock against external perils like fire or the weather. However, equipment, or machinery, breakdown covers the replacement of broken down equipment and parts when they fail unexpectedly.
The failure of refrigeration equipment can also put your perishable stock at risk, of spoilage. Fortunately, equipment breakdown cover normally covers the costs of replacing spoiled food due to the breakdown. In addition, one should seek endorsements to extend coverage for off-site power interruptions.
Risk three: Food poisoning
Policy to consider: Product liability
If a customer suffers food poisoning from a meal your business has provided, you could be legally liable to provide compensation for the injuries they suffer. If a customer – or worse, multiple customers – sues your business after contracting a bout of food poisoning, you may have to pay them damages for pain and suffering, medical expenses, lost income from being absent at work, and legal fees.
If multiple customers take action against you, the costs can quickly mount up. These costs can be hard hitting for restaurants or cafes, many of which operate with tight cash flows.
This is where product liability insurance comes in. Product liability covers your business if it is sued by a third party as a result of injury or illness caused by your product.
Risk four: Customer injuries
Policy to consider: General liability
Injuries, illness and property damage caused by customers slipping, tripping or falling are common in the foodservice industry and can lead to very significant claims.
The most common claims of this kind experienced in cafes and restaurants include injuries from slips on spilt food or drink, tripping on furniture or fixtures and falling down stairs. It is also common for customers to fall from defective furniture, such as broken chairs.
Public liability cover is crucial for any cafe or restaurant owner. It can cover legal costs, medical expenses, and damages, the expenses incurred by rendering first aid to others and compensation for any damaged or destroyed customer property.
Also, while not related to injuries, public liability can also provide cover for any third-party property in your care if it is destroyed or damaged as a result of your business’ actions or negligence.
Risk five: Theft, fraud and burglary
Policy to consider: Employee Dishonesty
Your premises could be burgled while they are closed or held up by armed robbers while you are trading. Unfortunately, your customers and even your employees could also steal from the business.
It’s not only money at risk either, any particularly expensive stock, such as high-quality wines and whiskies, could be particularly lucrative for thieves.
The main cover offered by insurers is burglary (or theft) cover. It covers the loss of stock and contents from theft and armed hold ups. However, it does not normally include any cash stolen or items lost as a result of employee fraud.
Money provides cover specifically for any cash stolen, lost or damaged. Given the amount of cash that changes hands and kept of premises on a typical day of trading, theft is a key risk for cafe and restaurant owners. You can elect to insure your cash during business hours, outside business hours, in transit and at your private residence.
Employee fraud and dishonesty covers the loss of stock, business contents and money caused by an employee’s acts of theft or fraud. It replaces the more limited protection provided by burglary and, as unfortunate as it can be, it covers a broad range of circumstances where an employee may have been stealing from you.
These are only some of the various perils present in a restaurant. In order to gain the most complete picture of your risk profile, and how best to address you specific insurance needs, seek the advice of a well-qualified independent insurance agent one who is knowledge about restaurants’, such as the knowledge you can find at www.sturdevantagency.com
My name is Ian Sturdevant, I’m the owner of Sturdevant Agency. I’ve been serving small business owners of northern Virginia with advice about their insurance since 2005. Work comp, liquor liability, etc. What separates me from the competition?
1. I represent several carriers, so you get several quotes, which means a better deal for you in the end.
2. I know insurance and restaurants, in other words, I’m a specialist – I know how to protect what you’ve worked hard to build.
3. I’m local, Northern VA is where I do my business, and your customers are my customers too.
4. Most of all, advice. Every business owner needs a good CPA, lawyer, and banker, right? An Insurance agent should be on that list. The price of insurance is the premium you pay. The cost of insurance is the premium you pay, plus any unpaid claims… Would you like to know what you think is covered, but isn’t? Would you like to have an advocate when you have claim? (703) 822 7505