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How to Prepare Your Restaurant for Unexpected Disasters

As of mid-April 2023, there have been 494 tornado reports so far in 2023 — nearly double the average at this point in the year. Many of these storms have occured outside "Tornado Alley," which includes states across the Plains, but instead have carved miles of destruction across the Southeast and Midwest. Part of why this year has been so relentless is because of the steady stream of atmospheric rivers that have plagued the West.

Catastrophic weather events are not likely to abate. They are disastrous for anyone in their wake; however, in addition to property loss and worse, they can shut down a restaurant for days or months. When you add other problems, like fires and power outages, you can understand why every operator needs to be like a model Eagle scout – always prepared.

An estimated 25% of businesses do not reopen following a major disaster, according to the Institute for Business and Home Safety. Taking the time to prepare for a disaster enhances a company's ability to recover from financial losses, loss of market share, damages to equipment or products, and business interruption.

"No one likes to think about the possibility of a disaster," says Darla Booker, regional communications director for the U.S. Small Business Administration; "yet disasters do occur. As a small business owner, it is important to understand the factors that could impact your success before they occur. Restaurant owners invest a tremendous amount of time,money and resources to make their ventures successful, so it would seem natural for owners to take steps to protect those investments."

Your most critical line of defense in the wake of a disaster, in terms of keeping your business solvent, is having proper and adequate insurance. At some point after you read this article, you should review your property and general commercial liability insurance, as well as any business interruption coverage you might have. You need to know exactly what you have purchased and how your insurance coverage is structured. Finding out you were underinsured or improperly covered after the fact is indeed insult to injury when picking up the pieces of your business after disaster.

From storms, flooding, fires, electrical and water outages, blackouts, snowstorms, contaminated water, and bomb threats to violent protests, active shooters, and even terrorism, the unexpected challenges awaiting restaurants are daunting, but controllable, with some commonsense, proactive steps.

In time of disaster, the best strategy is to try to minimize your losses, relates Arthur Gordon, now retired founder and former owner of the Irregardless Café, an iconic 50-years-plus concept in Raleigh, North Carolina.

"Without a doubt, the best strategy is to keep a great relationship with your electrician, plumber, HVAC person and carpenter, almost to the point that you have them on retainer." He recommends restaurants begin each year by paying these service personnel 20% of what was spent the previous year upfront.

"Then when you need them you can use that to influence how long before they can respond to your request. Sitting down with your insurance agent occasionally is also a good idea. He or she likely follows risk management industry news and trends and might be able to help you prevent a sad story with relatively minor adjustments to your coverage and policies."

Through October 2018, Erica P. Burns, served as the director of communications for the Louisiana Restaurant Association based in Metairie, Louisiana. During her career, she experienced Hurricanes Katrina (2005), Rita (2005), Gustav (2008), Isaac (2012), Harvey (2017) and Nate (2017), as well as the BP oil spill (2010), and urges restaurants to expend the effort to be as prepared as possible.

She implores operators to have a plan for your business and the safety of your employees and to follow the advice of local, state, and federal agencies. "Restaurants are among the first businesses to reopen after a natural disaster; because they are an integral part of communities. People need to eat. They provide food relief on the ground immediately following a crisis, and a sense of normalcy to the public when they need it most."

Melissa M. Stewart, Senior Executive Director at Texas Restaurant Association, says that preparing for emergencies depends on what your goals and needs are. Food and perishables may be saved for a day or two with generators, but without power you are likely in a scenario that prevents you from operating. The better option may be to reduce food and perishables on hand in anticipation of a big weather event to keep loss at a minimum.

Stewart advises restaurant owners who have not already crafted a disaster strategy to do so at once. Have a plan. What will you do with your property, assets and employees? What is the plan if you are closed for a day, a week or more? What if you need to have minor repairs? And, again, how quickly can you contact your insurer?

What about major repairs? What if you must be closed due to area roads being inaccessible? What if your team cannot make it to work? Have a communication plan for staff and partners. Organize your information for insurance, suppliers, etc.

Jeff Nelken, a food safety consultant based in Southern California, says he is also a believer in preparation. For instance, he advises restaurants to have on hand what he calls a "disaster menu,- a modified version of the standard menu that can be served at breakfast, lunch, dinner and for takeout, even during an interruption in normal operations.

Pre-planning steps, according to Nelken, should include contacting suppliers to see what they have available in terms of things like refrigerated trucks (diesel or electric), having on hand plastic eating utensils and paper dishes, dry ice for refrigerators, water for drinking and cooking, extra bread in case you go into sandwich mode and equipment such as temporary handwashing stations.

Prepare a Crisis Management Plan

"First and foremost, prepare a crisis management plan ahead of time as a proactive measure,- advises Betsy Kaesontae, a manager with NSF International, the global independent organization that writes standards, and tests and certifies products for the water, food, health sciences and consumer goods industries to minimize adverse health effects and protect the environment. "With a crisis management plan in place, important policies, action items, and responsibilities are established prior to a crisis."

Stan Harris, president and CEO of the Louisiana Restaurant Association advises restaurateurs to consider developing a disaster-support program with a commercial generator rental firm. If this is a frequent occurrence, you need to install a knock-off box to use generator power instead of the local utility system. Also, most business interruption insurance is tied to utility disruption, not the closing of your operations due to an emergency declaration.

When power goes out, Harris adds, take digital photos of all ruined or spoiled food items, and prepare a detailed inventory list including description, quantity and value. Operators should also understand local health codes and what they must do with prepared and refrigerated/frozen food when utilities are interrupted.

Now is the time to record the restaurant's valuable assets. You might want to take a few hours on a day when the restaurant is closed for business to take out your mobile phone and take photographs of artwork and other valuable décor to prove they were in the space.

You should continually maintain an accurate and reliable inventory of food and beverage. This information will be useful in assessing your damages when making a claim. One of the challenges when disasters strike is that utilities, including sanitary drinking water for consumption/ ice/beverages, can be disrupted, says Harris. Without hot water for sanitation, you may have to resort to single-use service items. Gas is rarely impacted, but you need to check with your local utility provider.

"Without potable water, restaurants must source ice and drinking water. Most health departments will not allow a restaurant to operate without hot water for hand and ware washing," Harris notes. "Check with your local health department," which might have standard protocol for managing these events. For restaurants with a building sprinkler system, hood Ansul system or other fire suppression systems, "know that if they discharge, the fire department usually pulls your electrical meter, disrupting electrical service, and gas-valve locks, requiring a replacement or reset following a plumbing inspection," Harris notes.

If the gas valve locks, the gas-cook line equipment will not fire up. Food prep containers, plates, glassware, flatware and service items that are affected by the fire or fire extinguishers usually must be discarded.

"If a building has structural damage, many jurisdictions condemn it until a permit for demolition is approved," says Harris. "If it isn't condemned, try to arrange to remove your furnishing and décor items that can be salvaged. They will need to be thoroughly cleaned and stored." The items that cannot be salvaged need to be photographed and inventoried. "Once the cause of the disruption has passed, determining a plan and possible timeline to reconstruct is critical."

Checklist

The corollary to preparedness, of course, is knowing how to best execute methods of preparation when the disaster finally arrives. Here are some guidelines:

Restore power. Loss of electricity is an immediate and critical concern. Unless you can afford a generator big enough to run all your refrigeration, there is not much you can do except avoid opening anything once the power does go out, says restauranteur Debbie Knobelsdorf, who with her husband Chris owns Westside Fish and Chips in Huntsville, Ontario, Canada.

"We have a battery backup that our POS is attached to that gives servers about five to 10 minutes to print any bills or reports that they will need to balance immediately after power goes out." The Knobelsdorfs' restaurant was once closed due to smoke damage from a smoldering fire in the laundromat beneath it.

"When the power goes out," says Kaesontae, "restaurants should stop cooking. If the dining room still has adequate lighting, allow guests to finish their meals. Close the doors, with a sign notifying customers of the issue, and do not allow new guests to dine until the electricity is restored."

The operator should log and record product and storage room temperatures at minimum every four hours. This precaution could prevent product destruction and food safety issues. She also recommends informing the health department as a courtesy.

Irregardless's Gordon concedes that it is too expensive to have a complete backup for all systems. Computers should have battery back-up so that you have time to shut them down properly. Trying to have a generator for the whole system is way too expensive. You may want to have a small generator for back-up coolers and freezers.

Keep good inventory so that you can file for losses with insurance, if necessary.

Alex M. Susskind, professor at the School of Hotel Administration at Cornell University, urges restaurant operators facing a loss of electricity to purchase generators for critical storage facilities like freezers, wine storage and refrigerators. "Do as much consolidation as practical so you can make efficient use of generators."

Think food safety. Whatever goes wrong will threaten food safety, which threatens the business itself. "At the end of the day, it's all about food integrity," says Warren Gilbert, one of the owners of Food Safety Specialists, a consulting firm in Elkhorn, Wisconsin. "Are correct temperatures maintained? Have there been any potential cross-contamination concerns via fire, smoke, water leaks cooler/freezer temps? There need to be programs and standard operating procedures to handle scenarios like temperature control programs, maintenance programs, glass control, etc."

In a worst-case scenario in which an establishment's plumbing is not working due to a sewage back-up, NSF's Kaesontae says, "restaurants should cease all cooking and allow guests to finish their meals. Close the doors and do not allow new guests to dine until the plumbing is repaired."

Regulation requires one working toilet for doors to remain open, and for a restaurant to shut down if there is a sewer backup. "Close the restrooms, as the toilets may not flush," Kaesontae says. Operations, construction, maintenance, and food-safety people should be notified. "You will need to contact a repairman immediately." Once the repair is made, staffers should begin cleaning the floors and drains with an approved floor-cleaning chemical.

Contact agencies. Government agencies stand ready to provide what Americans' tax dollars pay for. "FEMA, SBA and other agencies can provide a wide variety of help,- GHRA's Stewart says. "Operators need to file claims early and completely, follow the rules of the agency for relief, and stay diligent to the process."

Banks can help, she adds, with cash infusions and deferred payments on mortgages and loans, but operators need to be aware that loans must be repaid, just like any deferred payments to rent/loans/utilities."

Keep the Right Attitude

Food-and-beverage establishments should be naturals when it comes to turning lemons into lemonade. NSF's Kaesontae's advice to restaurant operators when it comes to surviving a natural disaster is to always put the safety of their staff and customers first.

"Treat your employees and guests as if they are part of your family. Follow disaster preparation steps. Above all else, develop a crisis-management team, and work with a team of experts like NSF International to ensure risks are properly assessed and analyzed ahead of time."

Arnold Shain, a consultant and principal in Restaurant Group Inc. in Seattle, Washington, tells clients, "Be patient for recovery and be aggressive with the insurance companies. Be sure to spend the money on marketing to regain previous sales volumes. Keep your staff involved in the closure and rebuilding process."

It is the unpredictability of extreme events that makes them so dangerous. "You can't really predict the disaster – what it is, how big it is, how long it affects your business," Knobelsdorf concludes. "It's just something you have to deal with at the time. My advice: stay calm. Others will react based on your reaction."

Gordon's advice is that "disaster is always lurking. Do not make yourself the victim, but stay focused and figure out how this set-back is going to turn into your advantage. For example, an opportunity to improve the premises during the repair and rebuilding process."

"It always does, if you keep the right attitude. No one can change what happened; we can, however, deal with disaster as an opportunity to make things better."

Commercial General Liability Insurance in Review

As you likely know, your commercial general liability (CGL) insurance covers your business against property damage, personal injury, and certain types of negligence caused by business operations. This coverage might apply if a customer falls while visiting your restaurant and is injured, if someone comes down with salmonella while dining at your restaurant and is sickened, or if a customer has an auto accident in your parking lot because it was icy after a winter storm.

Your policy covers your legal defense in the event of a lawsuit as well as damages up to the amount specified in your policy should you be found legally liable. An exclusion is a provision within an insurance policy that eliminates coverage for certain acts, property, types of damage, or locations. A standard commercial general liability policy does not cover liquor-related claims, so restaurants who sell alcohol typically add on liquor liability coverage for protection.

This policy does not cover your liability if employees are injured rather than guests; that is what workers compensation is for. It does not cover delivery service, since it protects the place of business. As many restaurant operators learned in the pandemic, insurers did not cover Covid-related cases where guests claimed that a restaurant gave them Covid, either.

Among other exclusions to commercial generality liability to note:

• If an employee of the restaurant signaled intent to harm (i.e., initiates a fight), the resulting injuries to a guest will not be covered even though bodily injury is otherwise covered.
• Injuries or damages related to pollution, such as a chemical spill at your restaurant, are not covered.
• Auto-related injuries are not covered so you need commercial auto insurance for business vehicles.
• More broadly, anything covered by another policy (such as workers' compensation) is not also covered by CGL.

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A Business Interruption Loss Insurance Primer

You have suffered a fire in your restaurant. In addition to cleaning up the mess, replacing inventory and rebuilding, you must suspend operations. Your losses not only include physical property, but income due to lost business.

A standard commercial general liability (CGL) policy does not provide complete coverage for all business operations; however, additional and optional coverage can be purchased as endorsements to the main CGL policy. One type of additional coverage is for business interruption.

This type of insurance provides coverage to pay for loss of income as the result of a covered loss to physical property. Business interruption insurance is available for an additional premium that is based on the amount of coverage, usually the amount of annual gross receipts.

The property damage portion of CGL coverage will provide cover for the loss or damage to the property itself, and the additional coverage under the business interruption portion of the policy will pay for the loss of income based on the property damage. To make a claim under this type of coverage, three conditions must exist:

1. A necessary suspension of operations.
2. Physical damage to covered property.
3. Caused by a covered loss.



Making a claim under this type of insurance coverage demands good record-keeping. Claims under business interruption coverage require a great deal of proof and are subject to quite a bit of scrutiny by the insurance company. To substantiate this type of claim, the submission of financial records that demonstrate gross income for a similar period are examined to determine the parameters of your loss.

For example, let's say you operate in a strip mall, and your fixtures and equipment are damaged due to smoke from a fire in an adjacent store. The property damage portion of your CGL policy will cover the losses to the building, equipment and inventory, while the business interruption portion will cover your lost income, if any, for having to cease operations due to the damage, if you can substantiate the loss through financial records from previous years of operations.

Be aware of the limits of this coverage. Here is an example of a loss that is not typically covered. You own a restaurant in a location completely dependent on a two-lane road to bring in your customers. A series of snowstorms closes the road for three days and forces you and your staff to evacuate. The storms do not do any physical damage to your facility.

Based on the loss of business income, your customers were unable to get to the restaurant, so you make a claim under the business interruption coverage portion of your policy.

Unfortunately, the claim would most likely be denied. While your operations were suspended, your property did not suffer any type of physical damage and you cannot make a claim for the loss of income.

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Power Outage – Emergency Prep Checklist

The Emergency Preparation Checklist provides guidance in the event of a power outage, specifically during a snowstorm, and what steps should be taken in advance to minimize the impact of such an event.

Summary of Features & Benefits:

• Provides a list of items to have on hand in the event of a power outage/ice-snow storm
• Serves as a checklist to use before, during, and after an emergency event
• Provides guidance on what to do immediately after power is restored
• Includes information on the steps to take to minimize losses and ensure the safety of your employees and customers
• The Emergency Preparation Checklist is downloaded as a Microsoft Word Document (.docx) file and can be easily modified to reflect your restaurant's specific requirement
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  Emergency Preparation Checklist - Power Outage/Snowstorm

  The Emergency Preparation Checklist provides guidance in the event of a power outage, specifically during a snowstorm, and what steps should be taken in advance to minimize the impact of such an event.

  • Checklists