The U.S. restaurant industry is gaining momentum after emerging from a two-year pandemic that shuttered doors and drastically reduced restaurant revenues.
According to the National Restaurant Association, the restaurant industry is expected to generate $899 billion in revenue in 2022, up from $640 billion in 2020.
Even with robust growth, the restaurant industry is currently facing daunting challenges, with labor shortages, higher inflation, challenges with door-to-door food and beverage deliveries, and ongoing food and supply chain shortages.
With such dynamic changes in restaurant management, industry experts say now is the time to review and even revamp restaurant insurance policies.
“As the COVID-19 pandemic continues to affect businesses around the world, restaurant managers have had to adapt their operations to stay afloat,” says Linda Chavez, founder and managing director of Seniors Life Insurance Finder, based in Los Angeles. “In addition to making changes to their menu offerings and business models, many restaurateurs are also reassessing their insurance needs.”
According to Chavez, while some insurers have been quick to adjust their coverage options in response to the pandemic, others have been slower to keep pace.
“Restaurant managers need to be aware of the changing insurance landscape so they can make informed decisions when choosing a policy,” she said.
What are the big insurance issues affecting restaurants in the future? Industry watchers say these key factors top the list.
Food delivery issues
Restaurants are looking to leverage standalone delivery companies such as Uber Eats and Grub Hub, as well as individual delivery drivers, both of which have different insurance risks.
“As these alternative forms of food service and third-party delivery systems continue to increase post-pandemic, restaurants have developed comprehensive contracts with these third-party providers requiring appropriate insurance liability limits and specific terms/conditions that provide the best protection for all parties,” said Kimberly Patlis Walsh, president and general manager of Corporate Risk Solutions in Rumson, NJ. “Some restaurants have developed internal safety plans for their own delivery drivers, including security checks motor vehicles on new delivery drivers and requiring minimum insurance limits on their personal vehicles.”
While these contingent workers can provide a much-needed boost to a restaurant’s bottom line, they also pose new insurance risks.
“Restaurant owners need to be aware of these risks and have the right coverage in place to protect against potential losses,” Chavez added. “Some of the major issues faced by gig/contingent/delivery workers include liability for accidents or injuries that may occur on the job, as well as loss of income coverage in the event a gig worker is unable to perform his duties.”
Covid issues are still front and center
In 2020, the pandemic hit restaurants across the United States hard, with many having to close. As a result, restaurant insurance needs have all but disappeared from the map.
In the middle of 2022, COVID-19 is still an issue, although it’s nowhere near the size and scope of 2020 and 2021.
“As restaurants continue to adapt, insurance claims remain uncertain,” said Mariano Demarin, president of Homeport Insurance in Miami, Florida. “Homeowners are not quite reaching pre-pandemic income levels. They are exercising both caution and common sense about their insurance needs.
The first job is to protect against new strains of Covid.
“The fact remains that there is the possibility of another variant, it’s just a matter of where and when,” Demarin said. “Post-Omicron has, however, offered a sign of relief to struggling restaurants. Across the country, mask mandates have eased, capacity restrictions have been lifted, and most states have returned to the status quo.
“Owners will always need to be vigilant with their insurance policies and take preventive measures to reduce risk not only for their customers, but also for their employees and suppliers.”
Maintain Worker’s Compensation Coverage
Health insurance needs are also a priority for restaurants.
“It’s critical that potential employees know that a safe work environment is about more than preventing injury or the spread of illness, it’s about making employee well-being a priority,” said William Heinsen, executive vice president at Homeport Insurance. “Furthermore, the ability to add health insurance as a benefit will go a long way toward retaining and attracting employees, considering the steady increase we’re seeing in the costs of this space.”
Respond to business interruption needs
Even as Covid recedes, restaurants should continue to review their coverage for replacement cost and business interruption protection.
“Too often premiums are lowered to ‘fit a budget’ or to meet the minimum of what an owner requires,” says Mark Moeller, founder of Recipe for Success, a restaurant consulting firm in Westport, CT. “This leaves the owner underprotected and often pushes the business into permanent closure in the event of an incident or disaster.”
Towards better insurance benefits for staff members
In the era of the great resignation, medical, dental and life insurance are all attractive to candidates and employees.
“However, this comes at a cost that the owner must factor into their budget,” notes Moller. “Offering a retirement plan, even if the company does not contribute is also a plus.”
Takeout on Restaurant Insurance Trends in 2022
As restaurants ramp up operations and welcome back diners after two years of battling a global pandemic, it’s critical that restaurateurs maintain adequate coverage and be proactive to mitigate risk.
“Proactive measures should include health and safety, security cameras and scheduled equipment maintenance,” Demarin said. “Taking into account what they post on social media, underwriters will take a look at it when deciding whether or not to offer covers.”
“Also, it’s a good idea to take any ‘special event’ type idea through their insurance agent, to make sure it doesn’t create any unwarranted risk that might not be covered or that might cause a cancellation,” Demarin added.