But My Agent is a Good Customer

We hear this statement from restaurateurs every day. While patronizing our clients is very important, we do that not because they are clients, but because they provide an extraordinary dining experience.

For the most part, the restaurant industry has narrow margins (10% to 15% is average). Below are the primary costs and optimal percentage of total sales that most profitable restaurants strive to maintain:

• Prime Costs          (Food and Payroll) 60% to 65% of total sales
• Management Salaries         10% or less of total sales
• Occupancy         10% or less (rent, CAM, Insurance, and taxes)

Let’s look at Occupancy costs since that includes the cost of insurance for the business. Those are the costs most business owners find the least “interesting,” however, a shift in just a few percentage points can quickly rock your profitability up or down.

Here is a real example of a recent situation we had in our agency. The owner of a fine dining restaurant in our city was contacted to discuss the insurance on his business. He said he would allow us to “bid” his insurance even though his current agent is a friend and a “good customer.” While meeting with him we did a risk assessment and gathered all of his insurance policies so that our team could review his current coverage. The following was the result:

• Double coverage that was costing him $3,500 per year
• Grossly under insured limits on Employment Liability protection
• Inaccurate sales figures
• Inadequate property protection
• No risk management training of his management team for Employment Liability
• No training of his management team for emergency situations
• No procedures in place for reporting and capturing incident reports for potential lawsuits
• Insurance cost savings of 17% or about $13,000 annually

Now my question to him is, “Did you hire the best insurance agent your money can buy?” If your typical profit margin is 10% is your current agent spending more than $130,000 per year in your restaurant? Can you afford to keep your “friend” as your agent?

If you would like us to review your current insurance program to see if your “agent friend” is doing the best for you, please contact us at 214-216-0225 or email Mona Carpenter at mcarpenter@innovativenationalrisk.com

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