Extreme weather can seriously affect small restaurant businesses, causing expensive damage and sometimes even forcing them to shut down temporarily or permanently. With more frequent occurrences of extreme weather like tornadoes, snowstorms, and floods, it’s essential for restaurant owners to understand these risks and take steps to protect their businesses throughout the year.
Restaurants typically operate on tight budgets and face various risks, such as customer injuries, rising food costs, labor shortages, and issues related to alcohol. These challenges are part of the restaurant industry, and when extreme weather is added to the mix, it can cause significant damage to roofs, interiors, and plumbing—problems that are costly and take time to fix.
To understand how bad weather affects small restaurant businesses, NEXT conducted a survey of 1,000 small restaurant owners to see the impact of this winter’s extreme weather. So, what challenges did they uncover, and how can this information be used to prepare for the future?
Restaurants are always adapting, whether it’s by hiring new employees, offering food delivery, or including alcohol on their menus to stay competitive. However, recent extreme weather events have introduced new challenges. Damages to infrastructure or accidents, like customers or staff slipping due to flooding, can be devastating if the business isn’t sufficiently insured. Adequate insurance coverage is crucial for all small businesses, particularly in the restaurant industry.
According to NEXT’s survey, 48% of restaurant owners reported damage from weather-related incidents between November 2023 and February 2024. This statistic clearly shows how significant weather can influence their operations and income stability. Among them, 34% felt they weren’t adequately insured for weather damages, and 24% were only somewhat prepared. Moreover, a concerning 26% of respondents didn’t know if their insurance covered extreme weather events. This points to a potential awareness gap in insurance coverage and an understanding of policy specifics.
Additionally, 29% of owners confessed they don’t have business insurance. Without insurance to help cover costs, restaurant owners would bear the full brunt of any weather-related damages. Insurers can offer protection by sharing educational content, such as blogs and newsletters, with valuable tips that aren’t always top of mind for business owners.
To be ready for extreme weather, restaurant owners should invest in preventive measures for both the inside and outside of their premises. This can significantly lessen seasonal weather impacts and related damages, regardless of whether they own or rent the building. Key steps include:
- Fixing and inspecting roofs to prevent leaks
- Cleaning gutters and downspouts for proper drainage
- Removing snow and ice regularly
- Insulating pipes and water lines to avoid freezing and bursting
- Installing systems to detect leaks
- Sealing drafts and air leaks
- Maintaining heating systems for the winter months
Owners should also stay informed about state requirements and routinely review their insurance as their businesses grow or change with the seasons. This helps close any insurance gaps and ensures they’re not overpaying for unnecessary coverage.
Restaurant owners shouldn’t hesitate to explore additional ways to minimize risks. This might include adding insurance endorsements, implementing risk management strategies, and conducting regular risk assessments. They can also transfer some risk by creating indemnification agreements with vendors or outsourcing risky tasks to experts.
As for insurers, they need to focus on providing tailored coverage because every restaurant is unique. Factors like menu style, cooking methods, alcohol service, seating, location, and additional services such as takeout and delivery all influence risk and coverage needs. By using technology and data analysis, insurers can better assess risk and offer insurance solutions that meet the specific needs of each business owner.
Entering the restaurant industry is notoriously tough, with around 60% of new restaurants closing within the first year and almost 80% shutting down within five years. In such a competitive market, unexpected costs or closures can be disastrous. By staying informed and properly insured, restaurant owners can better handle the uncertainties of weather-related damages and concentrate on running successful businesses.
