Insure Your Restaurant

Twelve UK Restaurant Risks To Look Out For

Having a restaurant is all about taking risks to see if your idea will work. You need to be willing to make mistakes and give things a go until you find what works for your business. But, with so much competition out there, it can be hard to know which risks are worth taking. That’s why we’ve put together this list of the top 12 risks that every restaurant owner should consider insuring against. Many new restaurants go out of business within the first few months of operation and failing to plan for these common scenarios could cost you dearly down the road.

Breakages and Stock Losses

Whilst the cost of a fridge that has a 5 - or even 20 - years guarantee may sound expensive to you, it will cost you a lot more in food spoilage, labour, and upset customers if a cheaper one breaks down unexpectedly. The average commercial fridge with just a one-year guarantee costs around £1,600, but you could lose that easily in spoiled stock and lost business if it breaks down after 18 months, and you would have no redress. Consider buying a better one - spoiled food could work out very expensive (plus you wouldn't have to replace the fridge as often).

Another risk to consider is breakages which are a common occurrence in restaurants and may may occur owing to a number of different things, such as hurrying staff who accidentally drop items or push things too hard in the kitchen. Another common cause of breakages is the strain on storage space, since restaurants often have limited space available. You may want to take out extended warranties that cover accidental damage on your more expensive equipment, or get your stock, fixtures and fittings propely insured.

Staff Illness and Injuries

Staff members getting sick or injuring themselves at your restaurant are events that you should be prepared for. Staff members are more likely to get sick, or suffer accidents, whilst they are working in a restaurant than they are at most other jobs, particularly during the first weeks of employment, when they are usused to their new surroundings.

Injuries can happen at any time whilst you are running your restaurant. They can be caused by things like slipping on wet floors or falling off ladders that are used for cleaning. Also, many are caused by things like accidentally chopping or cutting themselves whilst preparing food. Mandoline slicers are notorious for causing injuries when used by people in a rush.

The less experienced your staff members are, the more likelihood of accidents. By law you will have to have Employers Liability Insurance to cover accidents to your employees, but it is no substitute for thorough training in the avoidance of accidents in the first place.

Business Interruption

Like breakages and stock loss, the risk of business interruption occurs more often than you’d think. Storms, fires and floods are all examples of events that can result in your business being unable to serve customers for a short period of time, but even local roadworks or construction work can have a huge impact on business - if your restaurant is difficult to get to, many people won't bother.

Do make sure to take properly qualified advice when taking out this insurance though. Many business owners that had to close during the Covid shutdowns thought they were covered, but they weren't. As always, you have to make sure that you understand the small print of every policy.

Burglary and Theft

This is a risk that no business wants to suffer from. It can be financially devastating if it happens, and the best way to protect against it is through comprehensive theft and burglary insurance.

However you need to be proactive as well. Good burglar alarm systems are not expensive if you fit them yourselves, or you can get monitored systems that will inform the alarm company the moment a break-in is attempted, so that they can inform the police straight away. Many insurers will insist on an approved system anyway, and shutters protecting the wndows at night may also be mandatory.

Food Poisoning Risk

Food poisoning is a risk that every business that handles food needs to be aware of. It could cause severe illness and even death if mistakes are made whilst preparing food. The best way to protect against this risk is through a robust food safety and hygiene policy which includes detailed procedures for ensuring that all food is safe to eat, from basic hygiene to storage and preparation.

Food poisoning can have a huge impact on your business, both in terms of customer refunds and lost revenue. A food poisoning outbreak in your restaurant could cause lasting damage to your reputation and finances and the resultant publicity could be ruinous.

Just as dangerous to your business is the risk of customers suffering an allergic reaction to something in your food. Whilst the dangers of nut allergies and gluten are widely understood, there is a huge range of spices and foodstuffs that can cause problems for some diners. It is important that your menus list any of the more common allergens that your food may contain, and that your staff make a point of asking if diners have any allergies that the chef needs to know about.

A product liability policy might protect you against the consequences of this, if it became an issue.

Public Liability Risk

Accidents happen. If you run a restaurant, or indeed any business that deals with the public, there’s a real chance of a customer, delivery driver or indeed any other third party falling ill or getting injured in your restaurant, whether from slipping in a drink they spilled themselves, scalding themselves with hot coffee or swallowing a toothpick that had been (allegedly) left in the food. And yes, all these have really happened and resulted in massive claims.

You need to seriously think about protecting yourself against the risk of one of your customers suing you in the unlikely event that they are injured in your restaurant by getting public liability insurance. It isn't a legal requirement at the moment, but perhaps it should be.

Customer Feedback Risk

An important part of running a restaurant is getting feedback from your customers. However, all too often, restaurants fail to utilise this feedback to their advantage and instead decide to ignore all negative comments. You can protect yourself against the risk of ignoring negative feedback by ensuring that you have a customer complaint policy in place. This should outline who is responsible for receiving complaints, how they should be managed, and what the customer service standard should be.

Many complaints are caused by misunderstandings so any adverse comments on media such as Facebook, Tripadvisor or Trustpilot should be replied to quickly and courteously, and the customer invited to alter or withdraw the complaint. Getting into an online slanging match with a dissatisfied customer would be the worse possible thing to do though!

Food Fraud Risk

Food fraud is a global problem that’s on the rise, and there are two types you need to guard against.

The first is when an importer or manufacturer tries to pass off a substandard food product as something it isn’t. This is being detected increasingly by local authorities buying restaurant food and subjecting it to DNA analysis. In this way a number of food producers have been detected selling foodstuffs that are not what it said on the label. The way to avoid this risk is to ensure your suppliers are truly legitimate.

Another type of fraud, sadly, is fraud by customers falsely claiming that food they have been sold made them ill, or contained foreign matter such as insects or worse. This is a very difficult one to defend yourself against; however, having a scrupulously clean food preparation and cooking area, open for inspection, could at least reduce the risk of this happening.

Again, a product liability insurance policy could mitigate the damage a claim like this could cause you; and perhaps pay legal costs, too, if the matter reached a court.

Equipment Breakdown

Equipment breakdown is another risk that is common in all types of businesses. It can happen at the worst time when the equipment that you rely on just breaks down and can’t be fixed.

Whilst electrical equipment is generally safe and reliable to use there are still a lot of imported appliances which should be a lot better quality than they are. Be careful of what you are buying and in particular be very wary of second hand items or 'sale' items on auction sites like Ebay.

A common cause of electrical breakdowns is a power surge. If you’re in an area with a high risk of power surges, you need to make sure you have enough emergency power back-up; perhaps with an Uninterruptible Power Supply. If there is any doubt about the power supply in your restaurant get it checked out by a properly qualified electrician; a high proportion of fires are caused by electrical faults and one in your restaurant could endanger not only your business but lives as well.

Criminal Damage

Sadly there are individuals out there who get some sort of pleasure out of damaging the property of others and threatening the livelihoods of hard working people. Whilst most businesses need to guard against this kind of problem, restaurants can suffer more than most, particularly those that stay open late.

A smashed up toilet or a broken plate glass window need to be repaired quickly if a business is to continue. An insurer that can not only be relied on to pay for the damage, but also to act quickly to get it repaired, could save your livelihood.

Employment Tribunal Claims

If you’re operating a business that employs staff, you may be at risk of an employment tribunal claim. This is a risk that many restaurant owners aren’t aware of. If you dismiss an employee, or the person concerned claims to have been forced to resign, you could find yourself facing an employment tribunal, and win or lose your case you would still face a lot of worry and expense. A way to reduce this risk is to be careful about who you employ, and make sure that the staff that work for you are well-trained and happy with their working conditions.

Ultimately though insurance can take these worries off your shoulders.

Personal Injury Risk

The law states that you have to have insurance to cover the risks of any employees having accidents or falling ill as a result of their employment - but what about you? You are the most important person in the business. If an accident stopped you from working, what effect would it have? Could you find someone at short notice to run things for you, and what would it cost? Could you keep on paying your suppliers, staff, and all the other overheads?

Personal accident insurance could pay for any treatment you needed, provide you with an income, and make sure that you still had a business to return to once you had recovered sufficiently.

Summary

These may sound like a frighteningly expensive list of insurance needs, but it isn't necessarily so. Some comprehensive insurance packages cover most of the risks already, and since restaurant insurance policies are usually tailor-made for each individual business you could pick and choose which risks you wanted to cover against, and which ones you didn't think were important to you.

Your business is vital to you and you need insurance, but you don't want to spend a fortune on it. So, why not let a panel of insurers compete to get you the most competitive quotes?