Insuring New Restaurant Ventures: Challenges and Solutions for Insurance Brokers

Are you an insurance broker struggling to insure a new restaurant venture? As a broker, insuring new restaurant ventures can be challenging due to the increased risk of claims, liability concerns, and lack of experience. However, there are solutions to these challenges that can help you provide valuable coverage to these businesses. This article will explore the reasons behind this trend and offer tips for insuring new restaurant ventures using Distinguished’s underwriting process.

People at the Helm: Critical Indicators for Underwriting New Ventures

In the absence of having access to loss history, there are other indicators Distinguished Programs utilizes in the underwriting process of a new venture. One critical indicator is to look at the people hired to run the establishment, including their credibility and experience and their applicability to the operation. Start-ups that hire a full-time manager with solid restaurant management background will be looked upon favorably from an underwriting approach. It comes down to who is running the operation and their credentials, experience, and philosophy on running a restaurant.

Digging Deeper: Business Plans and Financing

Our underwriters will also dig deeper into a new restaurant venture, requiring a business plan to be submitted. Plans may range from major presentations to a couple of pages. The plan should outline the owners’ vision and restaurant concept, expectations for success, factors behind the selected location, what the competition looks like in the area, and the ownership structure, including bios of the full-time manager(s). The underwriter needs to understand what components and vision are behind making the restaurant successful and the owners’ plans for execution. It’s a red flag when a business plan is unavailable.

Underwriters also want to understand how owners plan to finance the start-up and that the operation is well-capitalized. For example, is the restaurant backed by private equity investors, or did the owners receive a significant bank loan for the start-up? Suppose the operation is heavily leveraged and owners have loan payments in addition to meeting their expenses. Underwriters will want to understand the restaurant’s pro forma and how owners plan to meet their financial obligations and run a successful operation.

Most start-ups aren’t instantly successful; it takes time to build up a following and turn a profit. Therefore, owners must have the resources to get through the start-up period and reach a point of generating a profit and not be in a situation where they must cut corners to save money.

Pivoting Operations: More Risk with New Ventures

There is more risk with new ventures, as they may need to adjust their business model to succeed. Owners of start-ups tend to tweak their operations while figuring out how to generate more revenue. For example, a restaurant may need to adjust its business model to achieve success. These significant changes may be outside the restaurant underwriting appetite, another reason new ventures are challenging.

Distinguished’s Underwriting Approach

In evaluating the property coverage for a new restaurant venture, Distinguished’s underwriting is pretty straightforward. On the general liability (GL) side, start-ups aren’t eligible for experience credit. Only operations in business for at least four years can get experience credit in our rating system.

New ventures may pay a somewhat higher rate due to their lack of loss experience; conversely, they may get a better liability rate than an operation with a not-so-stellar loss experience. The rates for the GL for most start-ups will likely be at the midpoint.

Distinguished’s Restaurant Package Policy

Distinguished is open to looking at all combinations of restaurant insurance risks. Take a look at our package policy available for fine dining, family casual with full table service, fast-casual, wine bars, off-premises caters, and ghost kitchens. We will also consider new ventures with experience.

Distinguished’s Restaurant Insurance FAQs

Are you available in all states?

Our Package product is available in all states except Alaska. 

What is the turnaround time on quotes?

We don’t have a specific turnaround time on quotes. However, we do accept rush delivery and will do our best to meet even the tightest deadlines. 

Is your product admitted?

Yes, we’re admitted.

What is the financial rating of your carrier?

Our carrier has an A+ financial rating.

What are the specifics of your umbrella policy?

Our restaurant umbrella policy has limits up to $140 million, and it’s on A rated paper.

What do we need to get a quote?

To get a quote, you’ll need to fill in the Restaurant Supplemental Questionnaire and a copy of the restaurant’s loss runs and ACORD application.  

About Distinguished Programs

Distinguished Programs is a leading national insurance Program Manager providing specialized insurance programs to brokers and agents with specific expertise in Fine Art and Collectibles, Environmental and Construction Professional, Executive Lines, Inland Marine, Real Estate & Builder’s Risk, Community Associations, Hotels, and Restaurants. Property and Liability products are distributed through a national network of agents and brokers. Serving the same core markets and partnering with the most stable and reputable carriers, Distinguished’s high-limit Umbrella programs remain the clear choice in its area of specialty for superior coverage, competitive pricing, and attentive service. Through thoughtful innovation, stemming back to 1995, Distinguished Programs fosters growth and opportunities for its brokers, carriers, and employees.

View a full list of our programs and submit business with Distinguished.

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