YOU SIT down at the table and begin to peruse the menu whilesipping your complimentary glass of ice water. After a few moments,a waiter or waitress approaches. Regardless of the style ofrestaurant or what's on the menu, the first question is usually thesame every time: “Would you like to hear about our specials today?”Some restaurants might even be known more for their specials thanfor the regular menu.

At Right Insurance Marketing, we're known for our “special” aswell, and you'll find us serving it on menus throughout ourmarketing area. Since our founding by Mary L. Wright in 1985, we'vespecialized exclusively in insurance for the food and beverageindustry. Today, our 20 employees and eight producers work togetherto write approximately $14 million in annual premium for nearly3,000 restaurants, taverns and cocktail lounges in California. Inthis article, I'll share the recipe we've used to succeed.

A smorgasbord of clients

About 80% of our clients are restaurants. Most of them areindividually owned and operated, though we do insure somefranchisees that are parts of national chains. Taverns, cocktaillounges and nightclubs are responsible for the other 20% of ourbook of business.

Our restaurant clients fit into one of three classifications.The first classification is the small restaurant. Theseestablishments usually are run by owner/operators with three tofive employees and have annual sales under $400,000. They are oftenlocated in shopping centers. They typically have fewer than 15tables and may have small outdoor patios. Their annual premiumsrange from $750 to $2,500.

The majority of our clients fall into the second category:family-style restaurants. These clients have between six and 25employees and provide table service for breakfast, lunch anddinner. Gross annual sales are usually between $400,000 and $1million, and the annual insurance premium for these clients rangesfrom $2,500 to $7,000.

In the third category, fine dining establishments, annual grosssales are usually a minimum of $1 million and may be as high as $5million. These establishments have anywhere from 50 to more than100 employees, and typically serve either lunch and dinner or justdinner. The annual premium for a client in this group starts around$7,000, and in some cases might be as high as $30,000.

Farmers market

Approximately 25,000 restaurants and cocktail lounges operatewithin 60 miles of our offices. To market efficiently, we studywhat types of establishments we've been most successful with, thenfocus on those prospects that best fit our client profile.

Our prospecting efforts begin largely with in-housetelemarketing and referrals from current clients. The primarysource of information for our telemarketers is a database of morethan 12,000 expiration dates that we've accumulated over the years.The database alone often results in more leads than we can respondto. We supplement it by obtaining lists of newly opened businesses,and we also find prospects in fine-dining magazines and fromresponses to our direct-mail and other advertising efforts.

Many of our clients send us referrals. We also ask them forreferrals when we close a sale. When we visit a new client tofinalize a sale, we often bring along a list of other restaurantsin the area. After we've finished our paperwork, we explain thatjust like them, a lot of our business comes from word of mouth.Then we review our list with them to see if there are any nearbyrestaurants that they can refer to us. This usually leads to ahigher-quality referral than if we just ask them to give us thenames of other restaurants off the top of their heads.

Qualifying and quoting

Once we commit to quoting coverage for a prospect, a producerwill visit the prospect two or three times and often invest eightto 10 hours obtaining information needed for a quote. Before we dothis, we qualify a prospect to determine whether we have arealistic chance at earning the business.

Our main qualifying criteria are cooperation and eligibility.Prospects reluctant to answer our initial questions or provideinformation on their current policy and financial data are lesslikely to trust us to write their coverage, even if we have thebest proposal. We look for prospects who understand that they mustgive us complete information to get a competitive quote. We obtainbasic information about a prospect to improve our closing ratio bydetermining whether it is eligible for our most competitiveprograms. We get such information as a loss history, the age andtotal area of the building, the establishment's number ofemployees, its closing time and whether it has live entertainmentor dancing.

We find out who a prospect's current carrier and agent are. It'shelpful to know whether the prospect is buying coverage through abrother-in-law or other close acquaintance. In these situationswe're not likely to convince the prospect to make a change.Sometimes we find that an establishment is already in a competitiveprogram.

Ordering up coverage

If quoting just a few lines of business gets our foot in thedoor with a prospect, we'll do it. But we prefer to write all ofour clients' coverage needs-and most of our clients like it thatway, because it's obviously easier for them. We write the majorityof our package policies on a Business Owners Policy (BOP) formthrough various insurance carriers. These policies offerreplacement-cost valuation and business income coverage that is12-month, actual-loss-sustained (ALS) and generally include a hostof automatic property extension coverages.

Each client's coverage varies, depending on the type and size ofestablishment and whether it is a restaurant or a bar/nightclub.Among some common aspects and variations of coverage are thefollowing:

? Building coverage: About 80% of the businesses weinsure lease their space, so we don't write much building coverage.When we do, it's important to make sure the building is adequatelyinsured. If limits seem low, we suggest that the establishment getan appraisal or inquire with its financial institution. Anotherimportant item is ordinance or law coverage. Owners of olderbuildings may be required to make costly upgrades in order to meetthe constantly changing building codes required by most cities inthe event of a complete or partial loss.

? Business personal property: Most carriers covertables, chairs, kitchen equipment and tenants improvements andbetterments under a single category, but some carriers offerseparate rates for these items and offer discounts when the itemsare categorized correctly. This makes knowing the details of acarrier's coverage categories important.

A tenant's improvements and betterments usually become thelandlord's property when a tenant vacates. New occupants mayincorrectly believe they own (and must insure) all fixtures andpermanently installed equipment. Advise your clients to discussthis issue with the landlord and carefully review the lease toensure proper coverage.

? Theft coverage: Most insurance carriers requirerestaurants to have a monitored central station burglar alarmbefore they will offer theft coverage. Money and securitiescoverage provides protection for theft of cash both in and out ofthe premises. We ask our clients what's the maximum amount of cashthey might have on premises at the end of a busy weekend, sincethis is likely to be the time of greatest exposure. Employeedishonesty is also an important coverage. If a theft of contents,stock or cash involves a member of the staff, payment could bedenied without this coverage.

? Business income: BOPs offer business income coverageon a 12-month, actual-loss-sustained basis, whereas most packagepolicies offer a set amount. When selecting a BI limit, it's vitalto understand the full amount of income that would be lost in agiven period-especially if a client's previous policy provided ALSand the new policy offers a specified amount.

? Liability coverage: Most of our restaurant clients'leases require them to obtain a $1 million per occurrence/$2million aggregate liability limit. Some larger property owners arebeginning to request higher limits. The most common liabilityclaims for restaurants are slip-and-fall incidents, patrons whochip a tooth while eating, and those who claim they became illafter eating at an establishment.

Liability coverage is written differently for establishmentswith high alcohol sales, where assault-and-battery cases are morefrequently the source of claims. Most carriers exclude coverage forassault and battery completely. Some may offer a sublimit anywherebetween $25,000 and $250,000, and others may offer coverage for“patron-to-patron” incidents but exclude coverage for“employee-to-patron” incidents.

For restaurants, premiums for liability coverage are basedeither on square footage or gross receipts. (Insurance foralcohol-related businesses usually will be based strictly onreceipts.) A small establishment doing huge sales in Beverly Hillswill get a better price with a carrier that uses square footage asits premium basis. A barn-like restaurant in a rural area, withrelatively less sales, would be better off in a receipts-basedprogram.

? Liquor liability and non-owned auto: Liquor liabilitycoverage protects against claims arising out of the negligentserving of alcoholic beverages. Depending on the state in which anestablishment operates, this may include “over-serving” intoxicatedpatrons and serving minors. Non-owned auto coverage for restaurantsis increasingly difficult to obtain because of the increasedexposure of food delivery. Carriers willing to offer this coveragegenerally apply a “food delivery” exclusion.

Submission stew

Before we make submissions to carriers, we like to collectvaluable data not found on the application, including a copy of therestaurant's menu, information about any awards it has won andfavorable reviews it has received. This helps our agents andunderwriters understand what type of clientele is coming in andwhat type of establishment they're dealing with.

Inspecting an establishment is important in preparing thesubmission. With our experience in the niche, we've received enoughsuggestions from carriers to know what “hot spots” to look forduring an inspection. We might also include digital photos.

Proof of service for a few items-such as flue cleaning, afire-suppression system and fire extinguishers-is important. Wealso include narrative descriptions of any past losses, along withan explanation of steps taken to address issues raised by them. Forinstance, if a client had a slip-and-fall claim, we mightdemonstrate to the carrier that since the incident, the client hasput non-slip strips on its steps, added handrails and improved thelighting.

Carriers are interested in insureds' financial information,especially with new ventures. Most restaurants that fail do sowithin their first year. In extreme cases, financial difficulty maylead to arson. Therefore, carriers request a r?sum? and maybe somepersonal financial information from owners who are new inbusiness.

A restaurant is far easier to inspect for potential problemsthan a nightclub. When we interview bar and nightclub clients, weask about key aspects of their management and operations. We wantto know how they prevent underage drinking. Do they use hand-stampsor wristbands to identify those eligible to drink? Have servers andbartenders undergone any formal beverage-service training?

Security practices are especially important with theseestablishments. We want to know if they employ their own securitystaff and what their procedures are for removing a rowdy patron-dothey always call the police, fill out their own incident report,etc.? If they hire an outside agency to provide security, we needto know if that agency has provided them with a certificate ofinsurance naming the establishment as an additional insured anddemonstrating that the agency has workers comp coverage on its ownemployees.

Presentation is everything

Restaurant and bar owners are visual people who succeed in nosmall part by being sensitive to the look and presentation ofeverything about their business-from the overall ambience to thepresentation of food. We present our proposals with this in mind.We stay away from long, overly detailed documents and keep thingssimple. We build our presentation on four factors: the strength ofthe carrier, the coverage details, the cost and the service we canprovide. Before we present, we learn enough about the client toknow which of these factors to emphasize.

New on the menu

At least 60 days before a policy expires, we pull the file andrequest loss runs. We send clients a questionnaire that asks aboutany changes in sales figures or the square footage of theestablishment, as well as other factors that might alter thepremium or change the client's eligibility for certain programs. Ifyou're not careful with this at renewal, you might someday find outthat the nice, quiet, family-style Italian restaurant you beganinsuring three years ago has added karaoke and dancing on weekends,and might not be the same risk you started out with.

We contact clients 45 days before renewal. We try to keepaccounts with the same carrier, but we must get our clients themost competitive programs available, so we shop ratheraggressively. We try to have renewal quotes in our clients' handstwo weeks before the current policy expires, so that we can reviewthe quote and confirm that they want to continue with us.

Big tipper

Success in serving the food and beverage niche requires a strongunderstanding of the industry and of the carriers' programs you'reoffering. This leads to a better experience for the insured and ahigher hit ratio with prospects. Developing expertise and knowingwhat your clients and prospects need and what your carriers wantcan lead to a successful experience and rave reviews.

Cliff Ziegler is marketing director at Right InsuranceMarketing. Since joining Right Insurance in 1993, Mr. Ziegler haswritten more than $12 million in premium for restaurant insurance.Readers may contact him at (714) 636-6491 or by e-mail [email protected].