Small Restaurants, Big Risks
From kitchen fires to the rising threat of cyberattacks, independent restaurants navigate a complex landscape of risks. Many, however, remain underinsured, leaving them vulnerable to potentially devastating financial losses. Experts at Victor Insurance are highlighting the critical role insurance brokers play in helping these businesses identify and address crucial coverage gaps.
For small restaurants, the margin for error is notoriously thin. They already contend with a range of potential crises—kitchen fires, workplace injuries, liability claims, and foodborne illness outbreaks—without the financial backing of larger chains.
According to Kate Trask, Senior Product Manager at Victor Small Business, “Small business owners always think cyberattacks are going to happen to the big corporations. But hackers know that small businesses are often the easiest targets. If someone gains access to a restaurant’s system, they could hold it ransom, steal customer credit cards, or disrupt operations long enough to cause serious financial damage.”
The Broker’s Opportunity
This precarious situation presents both challenges and opportunities for insurance brokers. Many restaurant owners believe they have adequate coverage through a standard business owner’s policy (BOP), but they are often underinsured, misinsured, or lack critical policies that would protect them from significant financial setbacks.
Beyond the Standard BOP
While a BOP typically includes general liability, property insurance, and business interruption coverage, it doesn’t always provide all the necessary protection. As Leslie Downs, Strategic Partnerships Manager at Victor Small Business, explains, “Just because a state doesn’t require your business to have workers’ compensation doesn’t mean you shouldn’t have it. This is a restaurant – people are working with knives all day. They burn themselves, they cut themselves, they slip. You need to protect your employees as well as your property.”
Downs also emphasizes the importance of regularly reviewing and updating coverage as a restaurant’s operations evolve. For example, if a restaurant initially operates as a small café but later introduces deep-frying, their fire risk increases significantly. Similarly, incorporating third-party delivery services may necessitate hired and non-owned auto insurance.
“Your power goes out and your walk-in freezer loses power – you think the food is fine, but maybe it’s not, and now you’ve got dozens of customers getting sick,” Downs notes, underscoring the financial nightmare that inadequate coverage can create.
The Growing Threat of Cybercrime
While physical risks persist, cyber threats are rapidly escalating as a major concern for small restaurants. The rise of digital payment systems, online reservations, and third-party delivery platforms has created new avenues for cyberattacks.
Trask warns of the dangers of ransomware attacks. “If a hacker locks down your POS system and demands payment to restore access, what do you do? You can’t process payments, you can’t take online orders, you can’t function. That’s a serious financial loss,” she says.
Moreover, even a seemingly simple phishing attack can compromise a restaurant’s financial accounts or customer data. As Trask points out, “The problem is, most small restaurant owners don’t see cyber as a real risk. But if they experience a breach and don’t have cyber liability insurance, they’re looking at thousands – or even hundreds of thousands – of dollars in damages.”
A Proactive Approach to Risk Management
Many small restaurant owners assume their existing coverage is sufficient. They may lack a full understanding of their exposures or hesitate to invest in additional coverage due to cost concerns. However, these businesses don’t have the financial safeguards available to larger chains, nor do they employ in-house risk managers or legal teams to review their policies.
Downs believes that brokers must take a hands-on approach. “If the restaurant is local to you, go eat there,” she suggests. “Look at it with your own eyes. See how it operates. Look at their website, their Instagram, see what they’re advertising. Are they hosting trivia nights? Are they running late-night drink specials? Are they doing a lot of delivery? These are things that affect coverage, and you need to know what they’re actually doing – not just what they think they need covered.”
Trask stresses the necessity of annual policy reviews. “Brokers should be acting like underwriters,” she emphasizes. “If you’re reviewing policies every year, you’ll catch potential gaps before they turn into costly claims.”
