This article was produced in partnership with Victor Insurance
Small restaurants, big risks: The coverage gaps that could shut them down
From kitchen fires to cyberattacks, independent restaurants face mounting risks - but many remain underinsured. Experts at Victor Insurance explain how brokers can help
For small restaurants, the margin for error is razor-thin. Small restaurants have always had plenty to worry about - fires in the kitchen, workplace injuries, liability claims, and the ever-present risk of a foodborne illness shutting them down overnight. Unlike large chains with corporate backing, independent restaurants don’t have the financial cushion to absorb major disruptions.
But many owners are unknowingly leaving themselves exposed to risks they haven’t fully considered and aren’t prepared for: the emerging threat of cybercrime.
“Small business owners always think cyberattacks are going to happen to the big corporations,” says Kate Trask, Senior Product Manager at Victor Small Business. “But hackers know that small businesses are often the easiest targets. If someone gains access to a restaurant’s system, they could hold it ransom, steal customer credit cards, or disrupt operations long enough to cause serious financial damage.”
For brokers, this presents both a challenge and an opportunity. While restaurant owners may believe they have enough coverage, many are underinsured, mis-insured, or completely missing policies that could protect them from this kind of devastating financial loss.
Most small restaurant owners believe they’re protected because they carry a business owner’s policy (BOP)—which typically includes general liability, property insurance, and some level of business interruption coverage. But a standard BOP isn’t enough to cover the full scope of risks these businesses face today.
“Just because a state doesn’t require your business to have workers’ compensation doesn’t mean you shouldn’t have it,” Leslie Downs, Strategic Partnerships Manager at Victor Small Business, says. “This is a restaurant - people are working with knives all day. They burn themselves, they cut themselves, they slip. You need to protect your employees as well as your property.”
But workers’ comp isn’t the only gap. Many restaurants also fail to update their coverage as their business evolves. Failure to review policies regularly is where they get into trouble, Downs notes. A restaurant might have started as a small café with minimal cooking risks, for example, but if they later introduce deep-frying, their fire risk increases significantly. Or if they begin using third-party delivery services, they may need hired and non-owned auto insurance to protect against lawsuits in the event of an accident.
“Your power goes out and your walk-in freezer loses power - you think the food is fine, but maybe it’s not, and now you’ve got dozens of customers getting sick,” Downs explains. “If you don’t have the right coverage, that’s a nightmare.”
While physical risks remain a concern, cyber threats are rapidly becoming one of the biggest dangers for small restaurants - and most aren’t insured for them. The rise of digital payments, online reservations, and third-party delivery platforms has made restaurants easy targets for hackers.
Trask warns that ransomware attacks are particularly dangerous. “If a hacker locks down your POS system and demands payment to restore access, what do you do? You can’t process payments, you can’t take online orders, you can’t function. That’s a serious financial loss,” she says.
And cybercrime isn’t just about sophisticated hacking. Even a simple phishing attack, where an employee is tricked into clicking a fraudulent link, can allow a hacker to gain control of a restaurant’s financial accounts or customer database.
“The problem is, most small restaurant owners don’t see cyber as a real risk,” Trask explains. “But if they experience a breach and don’t have cyber liability insurance, they’re looking at thousands - or even hundreds of thousands - of dollars in damages.”
Many small restaurant owners assume their existing coverage is enough. They may not fully understand their exposures, or they may hesitate to add more coverage due to cost concerns, but small restaurants don’t have the financial safety net of large chains. They don’t have in-house risk managers or teams of attorneys reviewing their policies. They rely on their brokers to educate them on the real-world threats they face and to identify the risks they don’t see coming - before those risks put them out of business.
Downs believes the best way for brokers to assess a restaurant’s coverage needs is to see it firsthand. “If the restaurant is local to you, go eat there,” she suggests. “Look at it with your own eyes. See how it operates. Look at their website, their Instagram, see what they’re advertising. Are they hosting trivia nights? Are they running late-night drink specials? Are they doing a lot of delivery? These are things that affect coverage, and you need to know what they’re actually doing - not just what they think they need covered.”
Trask agrees, emphasizing that annual policy reviews should be standard practice. “Brokers should be acting like underwriters,” she says. “If you’re reviewing policies every year, you’ll catch potential gaps before they turn into costly claims.”
