By its very nature, insurance only becomes an issue to most people when something goes wrong. So it’s no wonder that some restaurateurs—busy with the daily demands of managing inventory, scheduling shifts, and reconciling the books—can overlook insurance as a core focus of the business.
“Most operators think of it once or twice a year at renewals,” says Ron Stokes, president and COO of Wisconsin-based Roaring Fork Restaurant Group, which owns and operates 55 Qdoba Mexican Eats restaurants. “It’s not something you’re thinking about daily like you are food costs, labor costs, or sales. But it’s an important part of the business.”
Stokes is the chairman of the recently formed Qdoba Franchise Association, which cited insurance among the benefits of forming the group. Roaring Fork Restaurant Group is the largest franchisee in the Qdoba system, and Stokes says his team has shopped around to keep insurance costs low, but smaller franchisees will benefit from collective buying power.
“Leverage can be found in associations,” he says. “So we’re hopeful we can provide some of those benefits with our group.”
Little has changed in recent years in the way restaurants insure themselves against employment lawsuits, fires, and other losses, operators and insurance experts say. Nevertheless, the industry’s explosion of delivery services has put a pinch on some operators who struggle to afford the much higher premiums associated with operating vehicles to move food.
Makenna Starmack, who works in business development at online insurance platform CoverWallet, says most restaurants need policies for property insurance, general liability, workers’ compensation insurance, employment practice liability, and liquor liability (if applicable). Still, those prices can vary wildly.
“It all really depends on the type of restaurant you have and the size,” she says. “Obviously, the bigger the restaurant, the bigger the risk. That’s where you’ll find the prices will definitely grow versus having a little mom-and-pop restaurant.”
Starmack says insurance to cover delivery drivers is “pretty pricey” for restaurants, while third-party delivery services like Seamless and UberEats secure their own coverage.
“If they’re using their own auto, it’s obviously going to be a little bit more than if you have a company car,” she says. “Usually if you’re using delivery services, it jumps your prices a lot.”
Auto insurance can be crippling for some restaurants with high claims histories, says Brian Moroney, CEO of Drivosity, a telematics solution that tracks the safety performance of delivery drivers. Some operators have even ditched high-performing stores from their portfolios because of their high claims costs for delivery accidents.
“The horror stories I hear from franchisees are [like], ‘I had to sell my stores because I could not get insurance,’” he says.
Drivosity’s devices, which are mounted within branded car toppers, track speed, hard cornering, hard braking, and other metrics to give operators and drivers real-time safety data. The routing service can pinpoint to the intersection where a driver went wrong, giving them information to make improvements. Moroney says that because operators are ranked among their peers, it makes for friendly competition among drivers.
Such safety programs can include an added perk: Insurers have access to an in-depth assessment of risk at each restaurant location. If the reports are favorable, it can open operators up to new providers.
Until now, Moroney says, insurance companies have not kept pace with the growing popularity of delivery services. “The delivery industry is exploding, meaning there’s far more opportunity. [Insurers] can be more selective,” he says.
Drivosity has posted tangible results for its clients: fewer accidents, a stronger bottom line, and an expanded pool of insurance quotes. Still, Moroney says insurers, which often rely on historical actuarial tables, have been slow to adopt more timely approaches.
For operators who don’t specialize in delivery, the price tag of the associated auto insurance can deliver sticker shock.
“It definitely costs money. You have to be prepared for it,” says Little Greek Fresh Grill president Nick Vojnovic. “It’s tricky to manage, because we’re not like a pizza place that’s all delivery.”
Only three of Little Greek’s 33 stores offer in-house delivery. Others rely on third-party delivery services. Vojnovic suspects the influx of rideshare apps like Uber and Lyft has created a dearth of qualified drivers for restaurants and third-party services.
“Restaurants and delivery services are getting kind of the bottom of the barrel,” he says. “A lot of these delivery drivers are getting in delivery accidents, and they’re getting hit with higher fees.”
For other insurance products, Little Greek recommends a trusted vendor to franchisees but leaves the final decisions up to them. While some franchisors outline insurance requirements, Little Greek leaves those decisions to the store level, since landlords will often mandate their own levels of liability for tenant restaurants.
“Normally we kind of rely on the landlord. At the end of the day, that’s where their liability is. Landlords will set policies they’ll have to meet,” Vojnovic says. “I would not say insurance is an afterthought. Obviously it’s important, but unless I hear it’s coming in real high, it’s not like a major deal for me.”