By Lauren McDermott, Contributor
With the long-lasting financial effects of the pandemic, there is no shortage of difficulties and hardships that small businesses and corporations have faced. This is especially true in the restaurant industry, given constantly changing regulations meant to keep consumers and workers safe.
Managing risks in the restaurant industry is proven to help small businesses prevail when faced with obstacles in the industry and financial hardship. Insurance claims are expensive, and a survey found that 3 in 4 businesses experienced a situation that lead to a claim in 2020. It’s entirely common for restaurants to experience situations where they must protect their business and employees and it’s necessary to have a game plan for doing so.
As many restaurants fail due to financial problems, being aware of the types of claims that can financially ruin restaurants will allow your business to mitigate risks. Whether your restaurant has fire damage or car accidents, preparing your business for potential claims helps your business thrive.
Here are a few small business disasters to avoid as a restaurant owner.
Reputational Harm
Word of mouth can hold some serious weight when it comes to the quality, cleanliness, and safety of food. Restaurants can suffer severely when it comes to reputation damage like libel or slander, so you want to make sure that you and your business aren’t caught saying anything nasty about other competitors in the industry.
Your business can be charged nearly $50,000 per reputational damage claim brought against your business, and your standings in the community may also take a hit. Customers may no longer be inclined to purchase food from your business if you’re embroiled in a scandal with another restaurant.
Luckily, avoiding a reputational harm claim is easy to do! If you have criticisms of your competitors, it’s best to only share anonymously or in private. If you post negative comments about your competition online or in print, it can be claimed as libel or slander. Keep things professional in public and only voice your thoughts in private.
Car Accidents
Restaurants that deliver offer enormous value and grow their customer opportunities. However, if you run your own delivery team and your employees use a company car for deliveries, you may be liable for any car accidents that happen on the clock.
Typically, if an employee gets into an accident while driving it, commercial auto insurance will cover the damages, but you also never know if your employee or business could get sued by the other party.
Unfortunately, vehicular accident claims come with a hefty price tag of $45,000. If your business insurance already paid for the initial claim to repair your car, the money for this claim may be coming out of your bottom line.
If you offer delivery services through your restaurant, it’s wise to keep employees trained on safe driving skills. Additionally, only allow employees access to the company car if they have a safe driving record. This will help you minimize the chances of accidents happening while they’re on the job and reduce the risk of a claim for your restaurant.
Damage from Accidental Fires
Damage from fires plagues restaurants every year and can cause serious damage and harm to your business’ interior and equipment if they get out of control. The NFPB found that 61% of fires at eating and drinking establishments are from cooking equipment, and these can cost your restaurant on average $35,000 in damages.
Although seven out of ten cooking fires stay small and don’t leave the kitchen, it’s important to train employees on fire safety both in and out of the kitchen. Practice routine fire drills with all employees and make sure everyone knows how to work a fire extinguisher.
Regularly check fire alarms to ensure that they are working and replace batteries when necessary. It is also a great idea to make sure that any ceiling sprinklers are functioning properly in case of emergencies. When your employees are trained well and all safety equipment is functioning properly, you can feel safe knowing that if any fires happen in the kitchen, they won’t turn into anything big.
Customer Injuries
It's your restaurant’s responsibility to provide a safe and enjoyable experience for new and returning customers, and this means that no accidents endanger your patrons. If something does happen, it could cost your business an average of $30,000 for a claim.
Always ensure that any food or drinks served aren’t too hot to prevent any possible burns. Additionally, if spills happen, make sure to post warnings so customers aren’t likely to slip and fall.
Depending on whether you serve meat and seafood, it’s good to train employees to thoroughly cook these foods. Sometimes though, serving raw meat and seafood is a specialty for your restaurant, if so, you can avoid liability by posting warnings on your menus that these foods should be consumed at their own risk.
As countless restaurants have struggled throughout the past few years, business owners can prepare their companies to take on new challenges and succeed. Managing risk factors and staying educated on how to avoid different kinds of claims will help your restaurant to prosper.
Looking to lead your restaurant to financial success? Check out the infographic from The Zebra to learn more about limiting disasters for your restaurant business.
About the Author
Lauren McDermott is a lifestyle, business, and wellness writer with a recent BA from Bucknell University. She enjoys spending time with friends and family and inspiring others to achieve their personal and professional goals.
