With a growing number of apps and on-demand services, millennials in particular are increasingly ordering take-out food from their favorite restaurants.
As more restaurants expand services into delivery, risk managers must be mindful about vehicle exposures and aggressively manage not only driver risks but also food safety risks when taking meals outside the restaurant.
Richard Bleser, senior vice president, Marsh Risk Consulting, cautioned the restaurant industry audience at this year’s RIMS 2018 Annual Conference that while employee and customer injuries remain a source of worry for restaurant owners, the industry also faces growing exposure from the boom in food delivery and catering.
Restaurants continue to be labor-intensive, which means workers’ compensation losses are not uncommon. According to Marsh’s 2017 Restaurant Loss Cost Trends Report, nearly one-quarter (24 percent) of all restaurant workers’ compensation claims in 2016 were from cuts, punctures and scrapes. That made this type of loss the most frequent source of injury and represented a substantial increase from 2012, when cuts, punctures and scrapes represented 15 percent of all workers’ compensation claims.
However, Bleser said while employee and customer injuries are the most frequent loss, they may not be the most expensive. The growth in food delivery and catering is creating the biggest risk, and it’s something he believes restaurant owners should be worried about today – the delivery risk.
“It’s the most volatile risk out there,” Bleser said. “When it comes to a large lawsuit, it’s not going to come from someone cutting themselves in the kitchen. It’s going to come from the driver who’s not qualified, runs into a pedestrian and causes serious injuries.”
The restaurant industry is changing, and millennials are driving that change, he said. “It’s not the same model as it was 15 years ago when baby boomers were the primary customer in restaurants.”
Delivery and Services
In the past five years, revenue from restaurant deliveries jumped 20 percent, and the overall number of deliveries increased 10 percent, according to The NPD Group, a global information company.
“It seems that we are seeing a lot more organizations going into the catering side, too,” said Bleser. “While delivery picked up a few years ago, now people are moving into catering.”
Food safety as well as automobile liability risks are among the challenges associated with delivering and catering.
The number one cause of workplace fatalities continues to be vehicle collisions, according to the National Safety Council. “We have that exposure when restaurants start doing catering and delivery.” Whether it’s an owned vehicle or non-owned vehicle, the risk for auto liability losses remains high, Bleser said.
New convenience-enabling technologies, like mobile ordering and delivery apps, have driven revenue growth for restaurants in recent years. The restaurant industry has been quick to use such providers as overall U.S. food service traffic has been stuck between a 1 percent gain and flat for several years now.
While in-dining experiences remain flat, restaurant visits paid by mobile apps have increased by 50 percent over the past year, according to The NPD Group.
But these same third-party drivers such as UberEats, Grubhub and DoorDash add risk for restaurant owners. Bleser cites several concerns.
One concern is simply food quality. “There’s no control over the food once it leaves the restaurant. That delivery person maybe hoarding up all these food pick-ups from restaurant to restaurant and maybe the food was picked up but then delivered three hours later,” he said.
Another concern is in the third-party contracts. Restaurant owners take on huge liability when using third-party vendors, he said. The contracts are “not very friendly to the restaurants.” Bleser says that many contracts will state that the third-party is only the supplier of a software to connect with a delivery partner and therefore, it assumes no liability if something happens when food is sent through that delivery partner. “So, what happens when this meal gets tainted in the delivery process? Who’s responsible? The restaurant.”
Bleser’s concerns don’t end with the food. His biggest worry is the driving.
“What if that vendor has an accident and hits a pedestrian who has severe injures on the way to deliver your food? Come to find out this driver/vendor has a max of $50,000 liability coverage on his auto policy, and when they actually make the claim, the insurer rejects it because they find out he’s using his vehicle for business purposes.”
If that happens, where will the accident victim turn? “We know someone is going to pay,” he said. “Who will they come back to? The restaurant.”
While the cost of collisions has almost doubled in the past five years due to vehicle repair and medical costs, it’s the “nuclear verdicts” that he says should keep owners and risk managers awake at night.
“Five years ago, we would maybe see a $5 million jury verdict, and that was huge,” Bleser said. “Today, we are seeing in excess of $165 million verdicts, and this is an increasingly important exposure restaurants have to manage.”
Restaurant Fleet Safety Protocols
Bleser said it’s important for restaurants to implement a comprehensive fleet safety program.
He said it’s important to know how restaurants qualify drivers. “Are they continuously monitoring driver MVRs?” He also said a safety program should identify acceptable modes of transportation for drivers that use their own automobiles. “Are they using an auto, motorcycle or moped, or a bicycle?”
The safety of each vehicle should be monitored, and restaurants should provide driver training. Defensive driving, situational awareness training and monitoring driver behaviors are critical.
Also, owners should consider a “safe journey” management process, he said. This might include managing delivery times, monitoring driver distance for various delivery routes, monitoring traffic patterns and providing best practices for security.
“Conduct risk evaluations, develop security policies and procedures and train delivery personnel on what to do and where not to go,” he said.
Restrict unsafe neighborhoods or areas riddled with crime and require cash-free payments. “In today’s society of credit cards, try to get away from cash payments.”
Restaurants must protect food safety as well.
“Conduct formal food safety training with delivery drivers. Provide food security training, clean environments, climate control tools, delivery timelines and ways to secure food in transit,” he said.
Lastly, it’s important for restaurants to stay current on changing risks in the industry.
“Continuously monitor and assess evolving risks because they do change,” he said. “Safeguard your employees, customers, tools and your food, and your tools of operation such as your facilities and vehicles, and recognize and aggressively manage the most vulnerable risk – operating a vehicle.”
This article was originally published in the May 7, 2018 issue of Insurance Journal Magazine.
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