Chapter 1: Understanding Your Food Service Business's Risks
Part 2: How to Identify Your Food Business's Risks
Did you know that restaurant and bar sales are expected to grow by 3.8 percent by 2014 (according to Technomic.com's "U.S. Foodservice Industry Forecast")? Yours is an industry that continues to outpace overall employment in terms of consistent growth and demand.
But if your restaurant, bakery, catering service, or tavern is going to have staying power, you have to build a plan for managing potential pitfalls. This means taking careful inventory of your food service business's vulnerabilities and risk exposures. Plus, you'll need to ensure your establishment is operating within your state and community regulations.
Ready to get started? Here are some risk considerations for food services professionals.
No matter the size of your coffee shop, bar, eatery, or fine dining establishment, there are plenty of hazards on either side of the counter. Customers could burn themselves with piping hot coffee or food fresh off the stove. They could slip and fall in your dining area on a slick spot on the floor. Your employees could be injured on the job, too. In all of these scenarios, proper insurance coverage can protect you from paying out of pocket for the damages, but you'll also want to take steps to prevent these events in the first place.
As a food services business owner, you must comply with certain federal, state, and local regulations that govern food preparation. This may include health inspections or food safety examinations, depending on where your business is located. For a complete rundown, check out the FDA's guide, "State Retail and Food Service Codes and Regulations by State."
In addition to complying with health codes, you will likely need to register your business with the city or county clerk's office, which typically means paying a business-licensing fee.
You may also need to apply for a health permit from the county, a resale tax permit (if the state charges sales tax on restaurant sales), and a liquor license if you intend to serve alcohol. For more information about business licensure, consult the Small Business Administration's page, "Find Business Licenses & Permits."
It takes a team to run a successful bar or restaurant. However, your employees also present another obligation: most states require employers to carry Workers' Compensation Insurance.
If your servers, bartenders, or chefs are injured while working, your business could be liable for paying their medical bills out of pocket if you don't have adequate coverage (not to mention the noncompliance fines).
If you are a sole proprietor, all business profits and debts revert to you. So if you find your business on the wrong side of a liability lawsuit and you're found liable for wrongdoing, your personal assets can be collected to settle the debt if you don't have adequate commercial funds.
You can legally separate your personal and commercial entities by registering your business as a limited liability corporation (LLC). With adequate insurance coverage, though, you may be able to remain a sole proprietor without jeopardizing your personal finances.
And even restaurants organized as LLCs can enjoy improved financial security by purchasing liability insurance.
Unfortunately, in the fast-paced world of food services, accidents happen quickly and the repercussions can be serious. So if you unknowingly serve contaminated food, you could be sued for the illnesses your patrons suffer as a result.
If you serve alcohol or allow customers to BYOB, your establishment could be held liable for the booze-related incidents that happen on your premises and once intoxicated customers leave. You will also want to account for your equipment – downtime and repairs can easily drain your bank account.
Some risk is inherent in running a business. Failing to manage this risk is what can topple a small food service establishment. For a full illustration of the toll lawsuits take on small-business owners, be sure to check out "We the Plaintiffs," an infographic by AboveTheLaw.com.
Next: Chapter 2: Understanding Food Business Insurance Policies
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