Insurance for Restaurant Expansion

Owning a successful restaurant can leave you feeling accomplished. You love what you do, serve the community (because who doesn’t love food), and make money while doing it. Even if it is a small sandwich shop that only you and your spouse run, or if it is a large restaurant with 50 tables you will likely want to continue to grow. Being able to grow is a great option if you want to plan for you and your family’s future. Continuing to turn a profit is vital to this plan and to make sure you get to keep your money by having the proper insurance in place if you decide to expand.

When you are ready to expand your business there is an unlimited number of ways to do so. Depending on what your goals are, this will determine how you decide to expand your restaurant business. Let’s take a look at some of the ways to grow your business in the foodservice industry.

• Food Trucks – A great way to expand your restaurant with a low amount of overhead is to purchase and operate a food truck. The great thing about food trucks is that they have become extremely popular and customers love to try all the different foods available. Plus, since it is mobile you can get your amazing food out to so many more people. You can sell your food at festivals, business parks, and even in the city if you are near one. Keep in mind that there will be some rules and regulations in different areas so make sure you find out what they are before you go and set up.
• Locations – Certainly, one of the most obvious ways to expand your restaurant business is to open another location, or even add on to your existing one if you own the building. Having a second location may be ideal for your expansion so that you can obtain a new customer base within a different area. Building on to your existing location is a great option if you want to save money and simply need more seating or a bigger kitchen to fit your growing menu.
• Catering – One of the most affordable ways to expand your restaurant is to start offering a catering service. If you have the time, or you have employees that you can send to do it, catering is a great way to increase your income for very low overhead. The biggest expense with catering maybe if you have to purchase a vehicle to transport food and equipment, but the good news about that is it is a tax deduction since it would be a business expense. Or, if you already own a van or truck you can either re-title it to the business or rent it from yourself to your business. It is recommended that you re-title though to avoid any personal liability issues if you were in an accident.
• Delivery – If catering is not something you want to get into, maybe you can simply offer delivery. While DoorDash and other similar businesses have cornered the market on delivery, it is still more cost-effective for the customer to order directly from the restaurant. And, living in the day and age of wanting what we want immediately, it is a great way to attract customers to you rather than your competitor who does not offer delivery.
• Custom Orders – Depending on the type of restaurant you operate, offering the availability of custom orders may be a great way to expand your income and reach. This is especially the case with the popularity of diets like Keto, Paleo and the like. If you can offer customers a unique menu with these types of offerings, you are likely to do more business. It is also helpful for people who may have allergies. For example, if you offer a dish that contains peanuts but also offer it without, your reach will be more than those restaurants who simply put the warning on the menu and leave it at that.
• Alcohol – Certainly being able to offer alcohol is a great way to make extra money. People like to enjoy their drinks every now and then. If you are unable or do not desire to sell alcohol, you could always do BYOB instead. That way customers can bring their own bottle of wine to dinner if they like, and still get to enjoy the food that they crave from your restaurant.

Because every restaurant is different, the types of insurance policies you will need are going to differ. Someone who offers only baked goods is going to need different coverage than those offering sushi. A restaurant that has 3 employees will need less than one that has 100. Restaurants will often differ in what types of insurance policies needed during an expansion. Food Truck insurance is going to be different than Catering insurance. Make sure you know which insurance you need so that your expansion doesn’t ruin your business by having a gap in coverage.

Your expansion is going to cause more liability risk, of course, so you should consider the below insurances depending on your restaurant’s details.

• Commercial Property – If you decide to add a second location or expand on your current one, you will need Commercial Property insurance. If you already have it you will simply need to increase your limits. It is good practice to always review your limits annually anyway because you will be purchasing things for your business constantly and may need to adjust often. Make sure to look at your building limit if you own the building, as well as business personal property which is the stuff inside that you own. Many companies will allow you to count any equipment that is permanently attached to the building to be insured under building coverage so make sure you read your policy.
• Cyber Liability – With restaurant growth comes more customers. More customers mean more payments, and likely by credit card or some online platform. With hackers and data breaches happening daily, you must have Cyber Liability insurance. Not only will it pay for defense costs and lawsuit damages, but it also will help with the public relations portion of a data breach. Most of the time the public doesn’t even know when a data breach happens because it is fixed so quickly and the insurance company helps with PR.
• Liquor Liability – Deciding to either sell alcohol or allow BYOB leaves you with an exposure you may not have had to deal with before. If someone gets too intoxicated and either causes an accident after leaving or starts a fight and hurts someone or damages property, you will need Liquor Liability. Liquor Liability is for those who sell or manufacture alcohol, while Host Liquor is more for the BYOB option. Be sure to have the right policy for your exposure.
• Workers Compensation – Hiring employees for the first time can be exciting so you can start to delegate but you need to make sure they are covered for work-related illness or injury. Workers Compensation will provide lost wages and medical expenses if an employee is injured at work. If you already have it and you hire more employees with your expansion then you will need to look at your Workers Compensation payroll amounts and adjust them accordingly.
• Employment Practices Liability – With more employees, or employees at all, comes a big exposure to your business in the area of discrimination, harassment, wrongful termination, and wage and hour disputes. Even small businesses that are all family members have experienced these claims. A disgruntled employee can make claims against your business that can be extremely damaging. Employment Practices Liability will pay for these judgments if there are any, but more importantly defense costs. Lawyer fees and court costs can add up quickly, and it can be frustrating to pay for them when you know your business did not do what the employee is claiming. Employment Practices is great in that it pays for these costs.
• Umbrella/Excess – Having an extra layer of liability coverage has never hurt, and if you are expanding your liability is exposure is as well. Purchase and maintain an Umbrella Liability policy that will sit on top of your existing liability policies. If a judgment is awarded for more than the limit you have, the Umbrella can pick up the rest so you don’t have to reach into your profits. Most lawsuits these days are well over a million and the standard General Liability limit is that, so it can be possible to quickly use it up.
• Directors & Officers – Expanding your restaurant business may cause you to implement a board of directors. If you do, make sure to purchase Directors & Officers, or D&O, insurance to cover the personal assets of those board members. It will cover things like misappropriation of funds and sometimes fiduciary issues.