Restaurants! Food! Drinks!– these are things we all look forward to and cannot go days without consuming. Everyone has their favourite cuisine and favourite restaurants that they love to visit and dine in. The food industry is an industry that is constantly growing, with new restaurants opening around the corner every few months. Going to a new restaurant is an exciting moment, especially when it is a type of food that you have never eaten. It is one of the oldest industries but still full of innovation and creativity. The food and beverage industry (F&B) includes a large number of companies and not only restaurants. It includes butcher shops, bakeries, grocery stores and many more brands that produce consumable goods.

The F&B industry is an exciting and developing industry with an extensive range of companies and products. However, it is also an industry that mainly works on-site and sells on-site with many employees, each with different roles. This is why it is an industry with one of the most risks involved when manufacturing, selling and consuming the products. Especially restaurants, as they provide the product on-site, can be victims of various risks that could destroy a business. These risks can range from a fire burning down the site to a customer slipping on-site to a product causing illness to the consumer.

These risks are why nowadays, nearly all restaurants, alongside their F&B licences, also purchase a Restaurant Insurance package that helps their business avoid financial loss or business shutdowns due to unpredictable claims and more. Insurance helps owners protect their business and their employees. The article will explain why restaurant insurance is needed and what risks our favourite restaurants face while we are eating our tasty food.

What is Restaurant Insurance?

As customers, we read reviews online, go to the restaurant, order what looks the tastiest, eat and leave; it’s simple. On the other hand, Restaurant owners have to worry about a countless number of factors when opening, serving, satisfying customers and employees. A restaurant is always at risk of shutting down. According to a study done by Ohio State University on failed restaurants, 60% of restaurants do not make it past the first year, and 80% shut down or slowed down in five years. A business closing down could be due to many reasons, some in the owner’s control and several uncontrollable or accidental.

Restaurant Insurance protects the owner and the business from these uncontrollable risks. Such as fires, weather, employee claims, customer claims, and compensates the company due to these risks. A costly lawsuit from a guest or staff member can force a restaurant to close its doors in a matter of days. The restaurant insurance includes various business insurances in one package to protect the business from a large spectrum of risks while they keep producing the tasty food we love.

How Does Restaurant Insurance Protect Your F&B Business?

Property All Risk Property Damage

Restaurants mainly do most of their work on-site, from cooking to serving. The physical restaurant and assets inside are a crucial part of the business. In places like Hong Kong, it can be costly. No matter how hard a restaurant owner tries to avoid property damage, accidents happen, and harsh weather can also be a cause. A main part of cooking, as we all know, is fire. Fire is an element that can go out of control in seconds, causing extreme damage and burning parts or even the full restaurant down.

An example of this is when a Nepali cuisine restaurant in Hong Kong caught fire and burned the entire site down, resulting in casualties and a giant financial loss for the owner. Extreme weather such as typhoons, hurricanes can destroy the physical asset of the restaurant too. Depending on the force of these situations, it can cause significant financial loss from property damage. Property damage can have a shocking impact on the business and its unforeseen future.

Property All Risk Insurance is part of the restaurant insurance package No matter the company’s size, property all risks can protect the business property and the contents against these unfortunate events. This Restaurant insurance factor will protect the owner’s properties and cover all property damage financial costs due to the risks. However, restaurant insurance did not cover the example mentioned above since it did not have a proper F&B licence, and the owner paid all the financial loss. This is why a restaurant must have the correct licences and the best restaurant insurance before starting the business. Restaurant insurance can help the company rebuild and recover from any damages, to move on from the past to a better future.

Business Interruption

The severity of property damage can cause a business to have a temporary shutdown to rebuild the restaurant. During this time a business can lose a lot of the income they would regularly make, causing more financial problems to the owner. These costs would include income costs from customers, outgoing costs to employees (as employees still need to be paid during a sudden shutdown), rent and many more regular expenditures. When all these costs add up, it can result in the owner not having enough financial capital to re-open the restaurant as planned—unfortunately resulting in the owner having to sell the restaurant brand or the property itself.

Business interruption is an adding factor to restaurant insurance. It is a perfect factor that flows with property all risk. Business operations have to stop when rebuilding the property and business interruption insurance will cover all financial costs lost due to the unmanageable interruption. However, business interruption will not cover any interruption due to a pandemic such as Covid (as not related to property all risk claim). This section of restaurant insurance will cover regular income, employee salary and rent to the landlord. This leads to the business having sufficient money to re-start the company after all repairs have been completed. Therefore business interruption avoids the risk of shutting down due to property damage and gives hope to those loyal customers who have been craving your delicious food.

Employee Compensation

Employees/staff at a restaurant can either make or break the business. From a chef to a waiter, employees are responsible for the entire dining experience, from seating to serving and cleaning up. They are the foundation of a restaurant running and succeeding. A restaurant owner needs to have a solid and positive relationship with all the employees. Each employee should feel needed and appreciated. Especially in a restaurant, employees are at high risk from injuries, such as cooking, serving or even cleaning. An employee can easily cut, burn during cooking, slip while carrying many plates, and many more unforeseeable injuries during working hours.

According to Labour laws, the employer must pay for any injuries caused at work and continue paying the employee during their recovery. This can be costly to the restaurant owner depending on the depth of the injuries and will have to hire someone new to fill the temporary role.

Employee compensation/Employer’s Liability is one of the most common and crucial parts of restaurant insurance. This insurance will help the owner cover costs such as medical care and the injured employee’s salary. Furthermore, unfortunately, if an employee is permanently disabled due to a work injury, the employer is liable to pay the injured compensation. It is the same principle if an employee dies, the employer needs to pay compensation to the family.

A real example of employee compensation is: In late May, an employee of a fast-food restaurant in Hong Kong was attacked when she was on the way to work. She still attended her work as usual but was found in a coma at home after a few days. Under the “”Employee Compensation, an employer will still cover if an employee sustains an injury or dies as a result of an accident arising out of and in the course of his employment, his employer is in general liable to pay compensation under this Ordinance even if the employee might have committed acts of faults or negligence when the accident occurred.” ” (Labour department)

Public Liability

Public Liability

Customers are the most essential part of a business; without the customer, there are no sales. As a result, they are a critical factor when developing a business. They need to be always taken care of, and the product is always catered to their needs. They are part of the large term: public, but the public can also be anyone that is affected by the business. Every owner does their best to keep customers and the members of the public happy with their restaurant and the products. Sadly things do not go as planned in any business with customers on-site, as more people are coming in and out.

Minor and major mishaps with the public can always happen when running a restaurant. These can include customers slipping on a wet floor to a part of the property injuring someone outside. It can be any injury caused to the member of the public due to the business. Some injuries are brushed away, and some turn into the person injured suing the company. Lawsuits can be costly to a business financially and ruin the brand reputation.

This is where public liability plays an essential role in restaurant insurance. Public Liability will protect the business if a 3rd party (a member of the public) sues your business alleging that the business negligence caused them some type of bodily injury or property damage. The restaurant insurance, will use the public liability to cover all legal costs and also pay for third parties recovery. It allows the business to run normally and avoid any major public problems, protecting the owner finically and the brand itself.

Product Liability

Food is loved worldwide and restaurants gain their reputation on how good or bad the food is. The food and drinks created by a restaurant are known as their product. A strong product can help a business reach great success and create a positive reputation. Owners have to provide the best product, but that’s not all. They also need to make sure their food is safe, edible and won’t cause any harm or sickness to the consumer. Including how it is served and packaged. Customers can sue a business if the product has caused them harm while consuming it.

A famous example of this is when a coffee burned an elderly woman she purchased at a McDonald’s drive-thru, and that she received over $3,000,000. This was all because the hot coffee container did not have a “warning” label that it was hot. A law case like this can ruin a business, especially if they are not as big as McDonald’s, which can afford to pay the claim.

Product liability is another crucial part of restaurant insurance that can save businesses millions of dollars and prevent them from closing down. The main purpose of Product Liability insurance is to cover legal costs and damages for the company due to the claims. In the example above, product liability would pay the elderly lady for her injures and compensate the cost decided by the judge. Thus, once again, restaurant insurance can save the owner from immense damage and downfall of a restaurant.

The Benefits Of Purchasing Restaurant Insurance In The Food Industry

Restaurant Insurance-Benifits

Protected From Unexpected Claims

Now I hope you can understand; Restaurant Insurance covers a large number of claims and risks. These risks can occur at any time and affect a business in a drastic negative way. Restaurant insurance gives the owners the peace of mind of knowing they are protected from these claims and unpredictable events. It will allow the business to focus on producing the best food and service, rather than worrying about details that a buisness can’t avoid

Reduces Financial Loss

 The fact that restaurant insurance pays for all the claims and losses, saves the owners a large sum of money they could have lost. When a business loses such a large sum, it is hard to recover and rebuild the company back to normal. Restaurant insurance allows the owners to focus on a brighter future and invest the money into growing the business and attracting new customers.

Employee Safety 

 As restaurant insurance covers the medical care of any employee at work. It helps employees feel safer and cared about. If an injury does occur, they need to focus on recovering rather than worry about money and pay. It is crucial to have a happy employee. The more comfortable they are at work, the better they will work, resulting in more satisfied customers and a successful business.

To Learn More about Restaurant Insurance and get the best coverage for you and your F&B business, contact Red Asia Insurance.

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