Restaurant Insurance Market Update 2021

The restaurant sector, no doubt, has been through a lot in the last 18 months. But recent statistics show that through July 2021, the industry has had steady growth each month since February, with sales volume reaching close to pre-pandemic levels. Although it’s still unclear how the delta variant will impact the industry, we’ve seen remarkable resilience from restaurateurs. The pandemic sparked new ideas and lit the fire under trends already occurring.

Digital Ordering Is Here to Stay

During the pandemic, digital ordering ballooned, with takeout becoming an increased or new revenue stream for many establishments, including high-end restaurants that may have once shied away from to-go orders. In fact, those operations that don’t offer takeout are the exception today. Some set up in-house service while others use third-party delivery vendors for deliveries. Expectations are that restaurants will continue to expand their takeout and delivery offerings. Many have invested significantly in customer-facing technologies for delivery and curbside pickup as they realized the need to be more nimble.

Take a look at some stats:

Percentage of restaurant operators who say they added curbside takeout since the beginning of the pandemic outbreak in March 2020*:

  • Family dining: 78%
  • Casual dining: 73%
  • Fine dining: 81%
  • Quick service: 58%
  • Fast casual: 77%
  • Coffee and snack: 64%

Outdoor Dining Gets a Refresh

If you’ve been living in a city where the weather is mild (think Atlanta, New Orleans, Miami, Tucson, Corpus Christi, or San Diego), you’re accustomed to dining outdoors all year-’round. Since the pandemic, it really doesn’t matter where you live, as indoor dining has gone outdoors. Parking lots, sidewalks, streets, and various unoccupied public places were converted to dining areas to help keep the doors of restaurants open and to increase their seating capacity. Like takeout and delivery options, outdoor dining will continue, as it allows establishments to generate additional revenue. Many cities that allowed sidewalk cafes and outdoor dining in public areas will most likely continue to do so. New York City, for example, has made its outdoor dining program permanent.

The Rise of Ghost Kitchens

COVID led to the acceleration in the rise and popularization of ghost kitchens, or cooking facilities that produce food for delivery and takeout only, with no dine-in areas. The ghost kitchen exists only to serve orders placed via mobile app or delivery service web page. It provides great flexibility, as one kitchen easily can host multiple different restaurants, all with different types of food and styles.

Coverages to Consider for Today’s Restaurant Market

When speaking with restaurant owners, be sure their liability limits, including umbrella insurance, are high enough to respond to a catastrophic loss. Social inflation, anti-business sentiment among jurors, and nuclear verdicts aren’t going anywhere soon. Distinguished provides a full package of restaurant insurance coverages (general liability and property), including an umbrella program with limits up to $150 million.

Digital ordering, while bringing an increased or new source of revenue for restaurants, has also ushered in heightened exposure to cyber risks (data breaches, malicious malware, phishing, etc.). Cyber liability insurance is a must-have coverage in today’s environment.

New ventures were delayed because of the pandemic, but now many projects are back on track. We provide our restaurant insurance package to new ventures with strong restaurant management experience. Our program also does not include a “designated premises endorsement.” It extends to restaurants that may, for example, create a pop-up operation temporarily at another location to test out a new culinary concept, gain a wider audience, or seek investors.

We also offer an insurance package for ghost kitchens, one of the fastest-growing segments in the restaurant industry today.

Distinguished continues to keep its pulse on market trends in the restaurant sector while also responding to them by developing new and enhanced coverages and programs.

*National Restaurant Association’s State of the Restaurant Industry Report