Owning a restaurant means sharing your passion and love for cooking with your customers. It’s so nice to see your friends or family enjoying your delicious recipes! It’s certainly a source of great pride for you.
It must also be said that being a new restaurant owner involves a lot of responsibility. You may have to take on the roles of head chef, ambassador for your business, accountant, and manager.
One of the major challenges of restaurant management is finding an insurer. Indeed, insuring a business in the restaurant industry is a more difficult task.
In this article, Assurances Multi-Risques explains why it is difficult to obtain insurance when starting out in the restaurant business. We also outline a few factors that can influence the amount of your premium.
Less than three years in business: difficulties in obtaining insurance
Starting a business requires a lot of planning. You need to structure your business plan, find a name for your restaurant, and choose your location. Then you need to purchase equipment, hire competent staff, and finally insure your restaurant.
However, just as it can be difficult to obtain financing from a bank to start a restaurant, finding an insurer can also prove challenging.
Why do insurers refuse to insure a new restaurant?
This is largely because restaurants often have a shorter lifespan and a higher failure rate. According to the Association Restauration Québec (ARQ), 71% of new restaurants close their doors after five years of operation. It should also be noted that only 15% of restaurants survive beyond their ninth year of operation.
Furthermore, according to the ARQ, 216 restaurants went bankrupt in Quebec in 2021. Statistics on insolvency in Canada show that accommodation and food services are the most affected by bankruptcies.
For a commercial insurer, the fact that a restaurant may be in a precarious situation represents a higher risk. The insurer also considers the risk to be higher if the business has been in operation for less than three years. Insurance companies believe that management errors can increase claims.
Obviously, not all entrepreneurs and restaurant owners should be lumped together. These are just statistics, but they are often the ones that cause difficulties for business insurance.
Our best advice for finding an insurer for your restaurant is to contact us. An independent insurance broker can negotiate on your behalf.
In addition, if you already have experience in restaurant management, this could work in your favor. In this sense, some insurers may take this into consideration and reward you in your insurance terms and conditions.
A few things to remember to declare to your insurer
Insuring a restaurant requires taking several factors into account. Make sure your insurer or broker fully understands your situation so that you have adequate coverage.
Unfortunately, as brokers, we have too often noticed certain shortcomings in insurance policies for restaurants.
Here are a few points to remember to mention:
The sale of alcohol
If you sell alcohol on premises, you must declare this to your insurer. If you have a wine cellar in your restaurant, you probably sell expensive wine. You will therefore need to provide your insurer with an average value of the bottles of wine sold in your restaurant. The same applies to all types of alcohol.
Deep frying
Deep-frying in your restaurant requires you to have a CO2 certificate. Your insurer will require this certificate, as it directly concerns the fire safety measures necessary for this type of cooking.
Opening hours
If your restaurant is a restaurant-bar with a dance floor, your opening hours may be different. It depends on the type of establishment you own. It is crucial to declare these hours to your insurer, as they may affect the acceptability of your coverage. Omitting this information may result in a claim being denied in the event of a loss.
The delivery service
If you offer a delivery service, it is important to inform your insurer. This type of service may require additional coverage to protect against the risks associated with deliveries.
Offering valet service
Also mention if your restaurant offers valet parking. You will need to take out a specific insurance policy called “Police des Garagistes” (Garage Owners Insurance). This insurance protects against risks related to the management of customers’ cars.
A catering service
If you offer catering services, it is essential to declare this. Catering services have different insurance needs than traditional restaurant services. This is due to the specific risks and responsibilities associated with catering services.
The sale of prepared foods
Inform your insurer if your restaurant sells prepared food for takeout. As with catering services, this requires a different risk assessment and insurance coverage tailored to this activity.
Trust an independent insurance broker
In conclusion, developing your menu, finding the perfect location, and hiring the right employees has certainly taken up a lot of your time. You can be proud of the work you’ve accomplished!
To protect the fruits of your labor and run your business with peace of mind, you need to insure your company. To spend more time in the kitchen and less time shopping for insurance, let us take care of it for you.
While you sharpen your knives or flambé whiskey in the kitchen, our broker will do the research for you. All this to find you the best insurer at the best price.