Last fall’s November jobs report revealed that job growth rebounded with a gain of 227,000 following October’s report, which added only 12,000 jobs, falling far short of the anticipated 110,000. Rapid fluctuations like this demonstrate the uncertainties small businesses face every day. The latter part of 2024 was particularly arduous. Rising costs forced businesses to increase prices and reduce operating costs. Restaurant owners must grapple with unexpected disruptions, such as labor shortages, economic challenges, and ongoing supply chain issues.
In a recent survey, 30,000 small business restaurant owners revealed a nuanced landscape. Despite a year of record growth for the industry, restaurant owners especially feel the continued pinch of inflation, the stress of rising employee wages, and threats of everyday common risks to their business. This year will prove the same. Below is a snapshot of the most common and costly risks facing restaurant owners today and strategies for navigating them ahead of the new year.
Equipment breakdown is the most common risk among restaurants
Claims data reveals that restaurants commonly face challenges such as equipment breakdown, employee injuries, customer slip-and-fall incidents, and theft—each of which can significantly impact their bottom line. Equipment breakdown can result from inadequate maintenance, equipment failure, or human error, often leading to costly repairs and lost revenue. The restaurant industry is also particularly prone to employee injuries, with private industry employers reporting 2.8 million nonfatal workplace injuries and illnesses in 2022. Customer slip and fall incidents are frequent and can lead to substantial financial liabilities. On top of these issues, theft and vandalism add emotional and financial strain, with some restaurants experiencing up to a 20% increase in replacement expenses due to theft, ultimately driving up insurance premiums.
To mitigate these common risks, restaurant owners can take proactive measures:
- Schedule routine maintenance for kitchen equipment and keeping detailed maintenance logs are essential steps in preventing breakdowns.
- Provide safety training, necessary protective gear, and rotating tasks to minimize repetitive strain injuries.
- Maintain a strict cleaning schedule.
- To enhance security, cameras and alarm systems should be implemented, staff should be trained to be observant, and regular cash handling policies should be established.
Fire damage is the most expensive risk facing restaurants
Navigating the complexities of the restaurant industry involves costly risks that can impact financial health. From the looming threat of fire to the hidden dangers of water damage, these challenges can significantly disrupt operations. From 2021 to 2024, the top four most costly risks facing restaurants include fire, customer slip-and-fall incidents, assault and battery, and water damage.
To prepare for these expensive risks, restaurant owners can implement the following preparedness strategies:
- Conduct regular inspections and maintenance of fire prevention equipment alongside training staff on emergency protocols.
- Using anti-slip mats and placing clear signage can help minimize slip-and-fall incidents.
- Install surveillance systems and provide staff with de-escalation training.
- Inspect roofing and thoroughly check materials to prevent water damage and help safeguard from costly repairs.
Ready for tomorrow’s risks
The restaurant industry is no walk in the park. Rising costs and operational risks loom around every corner, demanding owners stay sharp and proactive, especially with the ongoing labor shortage.
Understanding the importance of comprehensive insurance coverage is essential for restaurant owners. About 45% of the most common claims faced by restaurant owners fall under commercial property insurance, as it helps protect the business’s physical assets. Still, it’s important to cover all bases.
One option to consider is a business owner’s policy (BOP insurance), which combines commercial property coverage with general liability insurance into one package that is usually less expensive than buying the coverage separately. General liability insurance provides financial protection against fire or customer slip-and-fall incidents. Workers’ compensation insurance is another vital policy addressing employee injury or illness. By incorporating these policies, restaurant owners can create a comprehensive safety net for their businesses.
Operational risks can strike when least expected, derailing even the most well-prepared establishments. Awareness of these risks is crucial for developing effective strategies to mitigate them.
Tong Zhang is a Data Scientist at NEXT Insurance.
Restaurant stock image by AliDawood/Shutterstock