Insurance Rates Are Proving the Hard Cost of Climate Change
Restaurants are getting hit with big upswings in their premiums. Restaurants that have never lost as much as a roof panel to climate change are learning you don’t have to be in the path of a hurricane or tornado to catch some of the financial damage. A sharp reminder comes every quarter with the insurance bill. Mother Nature’s ailments are turning the once relatively stable price of property and casualty (P&C) coverage into a cost that’s climbing like a SpaceX rocket. “Most people’s rates have gone up by a minimum of 20% and to a maximum of 60%,” said David DeLorenzo, owner, and CEO of two insurance firms—Ambassador Group and Restaurant and Bar Insurance—that specialize in restaurant coverage. He’s also been an investor in 13 restaurants. “It’s crazy.” The wallop is particularly painful for a new property buying its first policy, no matter how far from the coasts or a tornado alley it might be. The foundation of the insurance business is the concept of a pool. Premiums pour into a reservoir of funds from which damage reimbursements are taken. Since right before the pandemic, the outgoing flow has been surging, in no small part because of environmental issues. That’s prompted insurers to keep hiking their prices—or to stop offering policies to high-risk customers like restaurants. Those drains on the pool aren’t merely high-profile catastrophes like Hurricanes Helene and Milton. According to Next Insurance, a new breed of insurer whose business model is based on a constant feed of data gleaned from claims, the fourth most-common reason for a reimbursement in the $100,000-and-above range is water damage. With temperatures knocked out of whack by nature’s wobble, the cause could be a pipe that freezes and bursts, or water pooling inside from a heavier-than-usual rain, or snow melting faster than the ground can absorb the runoff. The costs for fixing those impairments at a single restaurant can run as high as $1 million, according to Next…
Why Are Restaurant Prices So High?
And why you can’t do anything about them. Before Covid hit the restaurant industry, if you spent $100 for a three-course meal including a beverage at a mid-level restaurant, it seemed an extravagance. Now, in 2024, you’d be lucky to find any that don’t cost that much and much more. A 16-ounce strip steak that cost $50 five years ago you’d be lucky to find now for under $65—and it will only be 14 ounces. And the $15 Martini is now north of $20. What is going on? Well, it’s not gouging: Restaurants considered a ten percent profit a reasonable rate of return when food costs were in the stratum of 25% to 35%. Now it’s tough for restaurants to keep them below 40%. That has to be passed along on a menu but only incrementally. No one’s going to pay double for a bowl of onion soup that used to cost $8. There are many reasons food costs alone have driven prices up so far so fast: Covid created supply and delivery issues that meant higher costs for obtaining high quality ingredients. But supply issues may also have to do with the weather in Columbia, where inflation can drive up the prices of coffee beans ,or Western Africa, where crop failure affects the supply and price of cocoa beans, the same as if a frost hits the orange crop in Florida or the raspberries in California—a $3 billion business in good years. Seasonality is key: According to the Bureau of Labor Statistics, the price of fresh fruits and vegetables may be 50% higher in winter months than in summer but a restaurateur cannot increase his prices for broccoli that much. Animal proteins face other problems: If there is a drought or extreme temperatures in the Midwest, beef cattle don’t feel like eating as much as they want to drink, so there’s less meat on the bone to go around. Yet even at high-end steakhouses charging $165 for a cȏte de boeuf for two make very little profit on the beef they sell. The real food profit (aside from cocktails and wine) comes from $30 pastas whose ingredients might run under $5, plus labor costs…
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Don’t Count Out Cash
Cashless strategies are killing customer relationships. The demise of cash payments might be exaggerated as 90 percent of people select cash as their most widely used payment method and 89 percent consider the ability to pay in cash as important for their customer satisfaction. What should restaurant operators take away from the results? “Going fully cashless is a huge risk for any restaurant operator,” Simon James, CEO, PayComplete, told Modern Restaurant Management (MRM) magazine. “Success in the trade often relies on being as welcoming to as many customers as possible. Eliminating cash payments almost certainly locks many people out from dining experiences completely with 55 percent of Americans in fact agreeing that being able to pay with cash supports inclusivity of all members of the community.” Among the report highlights:
- More than two-thirds (69 percent) said they always have cash on them.
- One in three (33 percent) cash users fall within the 25-44 age range, and nearly two-thirds (60 percent) belong to the mid-range income brackets, earning between $24,690 and $83,165.
- More than half (52 percent) feel cash will continue to have a prominent place in society for the foreseeable future.
- Nearly two-thirds (62 percent) believe using physical cash helps children develop financial management skills and track their spending.
The research also found that many consumers choose cash to aid their communities. Nearly two-thirds (65 percent) are aware that operators must pay a fee every time they make a payment using a card or mobile phone, leading to nearly a quarter of consumers (22 percent) choosing to pay in cash. “Rather than viewing cash as outdated, restaurateurs should consider it as a powerful way to engage customers,” added James. “For example, 91 percent of Americans say they would be willing to pay with cash if it meant earning additional loyalty rewards or discounts…
Smart Supply Chain Management Can Reduce Food Waste
And improve margins in your restaurant. Around 33 to 40 percent of food goes to waste each year. A large chunk of that comes down to complex problems in global food supply chain management that most restaurants have little control over. What restaurants can do, however, is re-think how their direct food supply is managed – from transport to inventory control. It may be a small part of the overall supply chain, but how food gets to a restaurant has significant implications. In this article, we’ll look at the smart strategies restaurants can enact in their supply chain management to minimize food waste, improve margins, and ease their environmental impact in the process. A smart supply chain is characterized by the use of “statistics to manage complexity and risk, from planning to decision-making.” In other words, it uses data to shape the supply chain, often in conjunction with AI and machine learning technology. For restaurants, the key to improvements in this area is the advancement of temperature-controlled shipping technology. Here are some of the key smart supply chain solutions that can help enhance restaurant operational efficiency: GPS Tracking Systems; These smart systems can do far more than just track the location of a restaurant’s incoming food deliveries (though this alone boosts efficiency). They can also be set up to monitor temperature fluctuations, light exposure, and humidity. This helps prevent food from being spoiled in transit and also helps restaurants ensure that their delivery systems aren’t wasting. IoT Monitoring; Internet of Things technology can be used to monitor the various machinery involved in keeping a restaurant’s food supply chain running smoothly. If a fridge breaks down, for example, IoT ensures that an alert is immediately sent out. Route Optimization; This technology uses real-time GPS data, alongside information on weather and traffic patterns, to optimize how a restaurant’s food delivery gets from A to B. From an operational efficiency standpoint, it helps reduce delays and fuel usage…
Turning Tables with Video Testimonials
A new recipe for restaurant marketing. Customers are spoiled for choice with restaurants. Incorporating video testimonials into your restaurant marketing strategy can showcase authentic experiences that build trust and engage prospective customers, turning them into loyal regulars. Few businesses rely on reviews and word-of-mouth recommendations as much as restaurants. But with third-party review sites, your restaurant can get lost in the shuffle. Video testimonials cut through the noise, boost your discoverability, and capture the experience much better than a text review can. Video testimonials are short videos that show happy customers sharing their positive experience at your establishment. These testimonials typically feature an individual speaking directly to the camera or being interviewed to glean authentic feedback. By offering social proof and trust, video testimonials encourage prospective customers to give your restaurant a try. Video also distills a lot of information into a short, engaging experience, which a prospective customer is more likely to consume over multiple paragraphs of a text review. Creating effective video testimonials doesn’t have to be difficult. With the right tools and preparation, you can create compelling testimonials that speak to your target audience. here are some tips: Outline the Video; Video testimonials should always be in your customer’s own words, but that doesn’t mean they should have full control over the entire video. Work with them to understand their experience and prepare questions to be answered, such as what made them decide on the restaurant and would they recommend it to friends and family? Was there a problem to be solved, such as a picky child or a couple’s disagreement on where to eat? These questions don’t need to be part of the testimonial, but you should include their answers and allow them to guide the narrative. Once you find the right formula, you can use it to guide your future testimonials…
Working to Slow Climate Change Through Regenerative Agriculture
One field at a time. Farmers in New York State’s Hudson Valley are using techniques that return carbon to the earth and restore soil health. Restaurants are beginning to embrace the movement as the next step in local sourcing, but is it a silver bullet for the climate crisis? Six Dutchess Farm in LaGrangeville, New York, operated as a boutique horse-boarding facility with indoor riding rink and multiple pastures when Jennifer Kouvant arrived in 2008. By 2015, when she and her husband, Hans Li, walked the 12 acres, they could no longer ignore the visible soil erosion from years of horse treading and the decimated orchards that bore very little fruit. But as rookie farmers—Kouvant worked in food policy and Li in architecture—the couple was desperately in need of mentors to teach them how to restore the health of their land. They found them at Stone Barns at Blue Hill, Chef Dan Barber’s working farm in Pocantico Hills, New York, and at Ballymaloe Cookery School, Organic Farm and Gardens operated by Darina Allen in Cork, Ireland. “Darina is an incredible educator and steward of the land,” Kouvant says. “We learned tons from her approach to caring for the land, listening to the land, giving back and not taking more than you give. The harmony and fullness resonate, and respect for the land, which carries straight into the kitchen and your plates.” They learned that through diversified livestock and rotational grazing, they could regenerate their soil and put carbon back into the soil instead of into the atmosphere—a move that mitigates climate change. And they discovered the power of pollination. When the couple built a small honeybee apiary on the property, the honeybees began to pollinate the trees and crops and, within a few years, that unproductive orchard yielded an abundance of fruit…
Here’s What Restaurants Need to Consider When Crafting a Value Menu
Companies have to stay competitive and drive traffic with value-priced items. After launching its Cravings Value Menu earlier this year, which offers 10 items priced at $3 or less, Taco Bell saw its same-store sales quickly improve. Consumers purchasing from the value menu tended to add other items, which helped drive the brand’s average check size up by about 10%, Yum! Brands’ CEO David Gibbs, said during its Q1 earnings call. Taco Bell is just one among many quick service and limited service restaurant brands to offer value menus and meals to boost traffic and sales at their stores — a response to backlash from cash-strapped consumers who are increasingly considering their bank accounts when making food decisions following recent inflation, experts say. QSRs are innovating around value once again after many chains took low-budget meals off the menu amid pandemic challenges. As pricing growth slows, it will be difficult for restaurants to drive sales without boosting traffic, which is why operators are turning to value offers, said David Portalatin, Ciranca’s senior vice president and industry advisor for food and foodservice, in an email. So how can restaurants craft an effective value menu when just about everyone else is doing the same thing? According to experts, creating the right value menu or meal promotion requires data-backed decisions and pricing that strikes a delicate balance of driving traffic without harming the brand and over committing on price cuts, experts say. It also requires a compelling marketing campaign that can utilize banners, staff, and the internet. So far, the strategy has worked for Taco Bell. Following its launch, nearly one-third of Taco Bell transactions contained an item off the Cravings Value Menu — 80% of which included two or more Cravings items, Gibbs said…
Did You Know?
How to Safeguard Your Restaurant in the Face of Severe Weather. n a time where restaurants are challenged by rising costs and labor constraints, the rise in severe weather adds another challenge that owners and managers must plan and solve for to protect people and assets. 2024 disasters like Hurricanes Helene and Milton are strong examples of how catastrophic weather can be, leaving businesses devastated and communities with billions in damages. Sadly, these events are only becoming more frequent; in 2023 alone, the U.S. experienced 28 separate billion-dollar weather disasters, breaking the previous record of 22 set in 2020. With extreme weather events ranking as one of the most significant risks to businesses by the World Economic Forum, now marks a critical time for restaurant owners and operators to evaluate their preparedness strategies…
Employee Tip
7 Restaurant Safety Tips To Prioritize. Running a restaurant comes with daily challenges, especially when it comes to maintaining a safe environment for employees and customers. The fast-paced environment, combined with high heat, sharp tools, and heavy equipment, adds up to a lot of cuts, burns and slips and falls in the kitchen1. By focusing on restaurant safety, you not only protect your team and patrons but also safeguard your business’s reputation and minimize liability risks. Here are seven essential tips to keep your restaurant operating safely…
