How Insurance and Restaurants Connect
Restaurants are one of the many backbones to society. Although there is a new and growing interesting in home cooking, a large number of people still choose to eat out regularly, with a majority turning to restaurants at least once a week. This creates a lot of competition in the restaurant industry, with many restaurants creatively fighting for customers while developing new and innovative approaches to food service.
However, the benefits of the industry -- a steady stream of customers with different tastes -- can also lead to risks. Restaurant profit margins are among the lowest in any industry, and working with food and customers directly increases the potential for running into a quality assurance issues. Considering the large amount of foot traffic most restaurants experience on a daily basis, as well as the many other risk factors common in the industry, most restaurants should carry several kinds of insurance to protect the various aspects of their business.
Risks Restaurants Face
Restaurants face a number of risks that make carrying different insurance products necessary. As many of these risks are commonly experienced across the entire industry, most are easily covered by only a few insurance products.
The type of risks restaurants face typically include the following:
- Injury to customers
- Damage or loss of physical property
- Equipment breakdown or loss
- Theft
These are common risks, and your restaurant may experience any one of them. The risk of injury to customers, for example, is perhaps the most common among them. Food poisoning is a common issue, particularly given an increase in food allergies in the past few decades. Many restaurants are taking the proper precautions regarding food ingredient warnings for potential allergens, but it’s almost impossible to cover every instance. Restaurants are routinely sued over mislabeled food items.
Additionally, customers can be injured as a result of other factors in the physical restaurant, such as wet floors or broken glass. These may be simple to take care of, but they can easily result in customer injury and subsequent lawsuits against the restaurant if they’re not addressed quickly enough or the appropriate signage isn’t displayed.
Restaurants also risk the loss of the property and their equipment due to things such as fires, natural disasters or theft. Depending on the geographic location as well, the property may be at more risk for damage due to natural disasters. If the property is lost or damaged and the business must shut down for an undetermined amount of time, the restaurant may never reopen. This situation has resulted in many restaurants closing for good.
Restaurant and Food Business Insurance
There are a number of insurance products that restaurants should consider. These include:
- General Liability Insurance or Business Owners Policy - Third party claims are common in the restaurant industry, and protect your business in the case a customer or their property was harmed in your restaurant.
- Business Interruption Insurance - If a storm temporarily shuts down your restaurant’s operations, Business Interruption Insurance will cover losses.
- Commercial Property Insurance - This coverage helps protect your physical restaurant and the equipment contained within, such as ovens and other cooking equipment.
- Commercial Auto Insurance - Personal auto insurance policies don’t cover vehicles that are used primarily for commercial purposes. So this coverage is recommended if you use a vehicle to make deliveries or cater.
How Much Restaurant Insurance Costs
Depending on the policies purchased and the restaurant itself, insurance can vary significantly in price. Restaurant owners need to weigh the risks, as choosing a minimalistic policy may save them money in the short term, but can cost them significantly if an unhappy customer decides to take legal action.
Generally, you should be at least protecting your business against property damage and third party claims, and decide on other types of coverage depending on the specifics of your business situation.