Two of the Greatest Risks Your Restaurant Faces.
You know many of the risks associated with your restaurant such as employment practices liability, employee dishonesty and product liability.
But what puts your restaurant at greatest risk? Two hazards that can quickly drive your restaurant into bankruptcy are a fire that damages your facility or being linked to a food borne illness.
According to the National Fire Protection Association cooking equipment accounted for 14% of the total number of non residential structural fires in the US between 1999-2002 and is the second leading cause of fires next to arson.
The CDC reports that the incidence of some foodborne illnesses are on the rise from 2005 to 2006. Food imports into the USA have increased by 50% in the last few years. The FDA currently is only able to inspect approximately 1% of the 25,000 shipments that come into the US each day from 100 countries.
The potential of being linked to a food borne illness has probably never been higher due to:
- Increased importation of food from all over the world
- Decrease in the ability of the FDA to inspect imports
- More sophisticated methods such as pulsed-field gel electrophoresis (PFGE) to link food borne illness to its source.
- Traditionally high industry turnover rate which makes it difficult to train and educate employees in food safety procedures.
- Legal doctrines of strict liability and constructive knowledge
Restaurants now more than ever need to be aware of the supply chain and take proactive measures to ensure the quality of the food they purchase and serve to their customers.
It's not enough to look at your insurance renewal and see that you have fire insurance, business interruption and first party food contamination coverage.
Too many restaurant owners feel a false sense of security, unknowingly being underinsured and finding themselves with inadequate coverage. You cannot change anything about your coverage limits or policy provisions once a loss has occurred
The coverage forms available for real property and business income are fairly standardized by ISO Commercial Insurance Services. The same however, does not hold true when it comes to first party food contamination (see the September Issue of Upscale Quality Insurance Newsletter)
Manage your exposure by:
- Establishing the amount and type of coverage you need.
- Understanding what will trigger the coverage.
- Determining how long your carrier will continue to pay your loss of income, advertising expense, and employees lost wages including your server's tips after you reopen.
- Establishing loss control and safety measures to prevent these types of losses from happening
What steps should you take?
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Obtain a certified appraisal for the reconstruction cost of your building.
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Determine the replacement cost of all your equipment, inventory and business personal property.
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Review the terms of your lease as it relates to property insurance requirements especially improvements and betterments.
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Maintain copies of all financial records, accounts receivable, customer lists and insurance policies at an off site location.
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Complete a business loss of income worksheet.
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Complete an analysis of potential post crisis and event response communication cost including the cost of a public relations firm.
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Obtain a loss control inspection by a qualified restaurant loss control specialist
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Implement an ongoing loss control and safety program including an emergency/crisis management response plan.
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Read and review the actual policy provisions that trigger the coverage and govern the payment of your loss.
Fire insurance, including business interruption and food contamination coverage is relatively inexpensive when considering the premiums paid versus the amount of risk you are transferring to the insurance company. And, although the likelihood of fire or food contamination may be perceived as small, the ramifications can be disastrous.
With affordable premiums and complimentary coverage analysis, there's absolutely no room for risk in your restaurant.
Contact Patrick Nolan today to learn more about the risk management solutions we have to offer and receive a free copy of our Fire Prevention Checklist from the Fireman's Fund iCustomer Series Portal.
