Owning a restaurant means that you have the possibility of sharing your love and passion for cuisine with your customers. It must be great to see all of these people enjoying your food while spending time with friends and family. You have every reason to be proud of your achievement! Owning a restaurant, however, also means wearing many hats: head chef, manager, brand ambassador, etc. One of the biggest challenges for restaurant owners is finding an insurer willing to offer them coverage from day one of their culinary adventure. In the course of this article, Assurances Multi-Risques would like to explain why it is often difficult to obtain insurance coverage. We also want to point out a series of factors that could impact on your insurance premium.
Less than three years in business? Insurance coverage may be hard to obtain
Starting a business requires a lot of planning: drafting a business plan, coming up with a name for the restaurant, finding a location, buying equipment, hiring competent people, and obtaining insurance coverage. The latter in fact can be as difficult to obtain as the bank loan that will allow you to launch your restaurant project since many insurers refuse to cover new restaurant businesses. Why is that?
Because, according to l’Association des restaurateurs du Québec (ARQ), 71% of new restaurants close their doors within five years, and only 15% of businesses are still in operation after nine years of existence. Also according to the ARQ, some 263 restaurants have filed for bankruptcy in 2017 alone. Precarious situations are considered an increased risk by insurance companies. For instance, insurers consider that management mistakes that will increase the number of claims are much more likely to occur in businesses less than three years old.
Of course, all entrepreneurs and restaurateurs are not alike… We think, however, that your best bet to find an insurer willing to offer you adequate coverage is to contact an independent insurance broker who will negotiate the contract for you. If you already have experience in the restaurant management business, make sure to point this out as insurers are likely to take this into consideration and to offer you better insurance conditions.
Things to tell your insurer about
Insuring a restaurant is based on several factors, which means that you have to make sure to paint an accurate picture if you want your broker or insurer to fully understand your reality. Unfortunately, we as brokers, have often noticed significant gaps in restaurant insurance requests. Here is a list of items you must include in your insurance application:
- Alcohol sales
If you sell alcohol on your premises, you must inform your insurer. Also, if you own a fine dining establishment, you are probably offering your clients pricy bottles. You must therefore inform your insurer of the average price of the bottles you are offering in your restaurant.
- Fried foods
If you sell fried foods, you must have a CO2 safety certificate. Your insurer will ask for it.
- Opening hours
If you plan on opening a resto-bar with a dance floor, chances are that your opening hours will be a little different from the norm. Make sure to tell your insurer this as it will impact your insurance eligibility. Remember that if you have omitted this information, your claim could be rejected by your insurer.
- Delivery services
If you offer delivery services, be sure to inform your insurer as this may warrant additional coverage.
- Valet services
Once again, you must inform your insurer if you are offering this type of service since you will need specialized insurance coverage called a “Garage Policy”.
- Catering services
- Prepared food and take‑outs
In conclusion, you have certainly worked very hard to find the right venue, hire competent employees, and develop your menu options, and you can certainly be proud of all the work you have done! In order to adequately protect your restaurant, however, you will need proper insurance coverage. If you want to spend more time cooking than phoning insurance companies, we suggest that you contact an independent insurance broker who will take on the task of finding the best insurance policy at the best price possible while you are busy sharpening your knives or preparing a whiskey flambé.