8 Reasons Why Restaurant Insurance is Not a Drive-Thru Window 

Congratulations on opening your restaurant! It is always an exciting time ordering new equipment, selecting vendors, planning the grand opening, getting the word out to potential customers, the media, the restaurant critics, and your old friends and vendors from the foodie community.

However, don’t make the mistake of thinking that getting proper insurance for your new business is as simple as a quick visit to the corner agent’s office. Getting proper restaurant insurance, just like your setting up your own venue, has lots of variables that only the knowledgeable and experienced insurance professional can provide. Like ordering cheaper food products from the big vendors: Don’t make the mistake of cutting corners here. Get an agent who understands and can address the following:

Tenant’s Improvements – Setting up a food venue is not as simple as arranging tables and chairs. When you signed your lease, you likely negotiated with your landlord about improving the property and making it suitable for indoor (and/or outdoor) dining. This could include the installation of kitchen equipment, improving utility outlets (electrical, plumbing, sewer), and basic remodeling. Make sure your improvements are insured properly. If the contract says these items are your responsibility, then make sure they’re covered on your policy. This is known in the insurance industry as Business Equipment.

Business Interruption – If an insured loss occurs, like a tornado or hailstorm, sometimes your restaurant can be damaged just like your home. Worse yet, city inspectors will often order your restaurant closed until proper repairs can be completed and approved. You could be out of business for 30 days, 60 days, or longer. Remember, even when your repairs are completed, the City Inspector isn’t always ready to come out immediately. Your insurance can provide for your lost revenue while the restaurant is down for these repairs.

Loss of Refrigeration – While other business aren’t as dependent upon a solid supply of electricity, it is the lifeblood of a restaurant. Think about the wholesale cost of the products sitting in your refrigerator at the moment, including frozen goods. Estimate the value at the peak moment when you’ve taken a Thursday delivery for the upcoming weekend business. How much would you stand to lose if the power went out at 3am that night, and twelve hours later all of this product was spoiled?

Landlord’s Liability – Most landlords are savvy enough these days to know that any slip-and-fall or other on-site injury at your place could very well get them involved in a claim. Expect to hear that they want not only a certificate of insurance, but they will also want to be named as an Additional Insured on your policy. With this in place, if a claim arises due to the activities in your restaurant, your insurance company will defend and protect your landlord just as they would you, their primary customer. In many cases, this extension of coverage can cost a bit extra, but is well worth the price.

Hired & Non-Owned Auto – Most restaurants don’t have a fleet of vehicles. Most don’t have any cars at all. However, if you have to send your General Manager over to the big retailer down the street to get some ice on a Friday night, or a few cases of beer – be advised that the use of that person’s vehicle is now temporarily part of your business operation. You don’t own that car, but that car is doing something for your business. That makes the Hired & Non-Owned Auto coverage vital to your restaurant activities.

Food Sales Liability – Your restaurant’s liability insurance premium will be based on your actual – meaning retail value – food sales. Make sure you make a conservative, yet accurate, estimate of your annual food sales for your insurance agent. Don’t project based on your emotions – everyone wants a $5 million opening month – be reasonable. Remember that, at the end of the policy year, the insurance company is going to come back and audit your sales records. If you exceeded your estimated sales from a year ago, you could get hit with an additional premium. Likewise, the opposite is also true – lower-than-expected sales could generate a refund.

But don’t simply send your hard-earned premium dollars to the insurance company, only to have it returned more than a year later to you in terms of a refund. Estimate conservatively going in, and keep that monetary outflow to a minimum.

Liquor Sales Liability – Most restaurants will want to be involved in the liquor trade. It is, after all, one of the highest-margin products you can sell in your facility. However, make sure your insurance company knows that you are in this business, as well. Liquor liability carries hazards that vary in each state, and insurance carriers will want you to separate your liquor sales from your food sales for this purpose.

Assault & Battery – If you are contemplating adding entertainment to your venue, even something as simple as a DJ or a single acoustic musician in the corner, keep this coverage in mind. If you’re catering to a younger crowd who doesn’t mind standing shoulder-to-shoulder in your restaurant bar until closing time, you might have to consider hiring some crowd control professionals.

This is rough work, and not for just anyone. Ask any law enforcement professional. If you choose to go down this road, make sure that the Assault & Battery insurance forms are a part of your insurance package. Those guys out front are engaging in things that absolutely require this protection, especially in the wee hours of the night.

As you know, running a restaurant isn’t for everyone. It takes a certain level of knowledge, experience, and determination to make all the variables work together for a profitable enterprise. Your insurance for this business is no different, nor should your qualifications for the right restaurant insurance professional.