Though food service is rumored to have the highest failure rate of any industry, rest assured that the cards are not stacked against you. About 27 percent of restaurant startups fail within their first year of business, which isn't far from the average for other industries in the same timeframe (according to the study "Why Restaurants Fail [PDF]," published in Cornell Hotel and Restaurant Administration Quarterly).
However, there are unique risks that your restaurant, banquet hall, coffee shop, or tavern may encounter. And without proper safety measures and planning in place, these risks could devastate even the best-run business.
Since knowing is half the battle, let's look at an overview of the types of risks your food business may come up against:
Most states today have some kind of dram shop laws – that is, laws that hold liquor-selling establishments liable for damages their intoxicated patrons cause. For instance, say your bartender over-serves a customer, and that person drives drunk and kills another person. The deceased party's family can sue your establishment for its negligent service.
Food Safety Concerns
If your restaurant or catering business serves food that makes people sick, you could be sued for medical expenses. Even if you take every possible safety precaution to properly store and prepare the food, your supply could still be contaminated before it ever reaches your business. You could also face a hefty lawsuit if you serve food with undeclared ingredients that trigger severe allergic reactions.
Fire Hazards and Property Loss
Fires are one of the biggest risks food businesses face. If a grease fire gets out of control, you may end up with hundreds of thousands of dollars in property damage and loss.
Accidents on Your Property
Accidents happen all the time. But in the business world, they can come with serious financial consequences. For example, if a customer trips, falls, and injures themselves on your premises, you could be liable for their medical expenses. And if one of your staff members is hurt on the job, your business may be held responsible for covering their healthcare costs.
Risk Management Resources for Food Business Owners
Managing and reducing these risk exposures is one key to ensuring your food business's success. With the appropriate precautions and insurance policies in place, your establishment can survive an unexpected hit without draining its finances.
Check out these articles to learn how you can manage and mitigate the risks your food business may face:
Small Business Insurance: The Key to Strong Businesses
Small business insurance protects your business against property loss, lawsuits, and business interruption. When you're ready to build a risk management plan for your food services business, apply online for insurance quotes from insureon.