5 Restaurant Risks Owners Face and How to Manage Them

Managing your own restaurant is tough. You have to worry about the high overheads. You also need to manage your employees to cook and serve your customers.

As a restaurant owner, you have devoted all your attention into growing your business. But, there are restaurant risks that might cripple your business.

In this article, we will share 5 risks a typical restaurant has, and how can you manage it.

1. Fire

Fire Accident

Fire is the number 1 hazard to restaurants. In 2015, there are 50 fire cases related to restaurant, hawkers and canteens. If the fire is not put out in time, you may suffer prolonged business interruption or worse still, causiing third-party damages to your neighbor.

You can implement the following to minimise the risk of fire occurrences:

  • Keep portable fire extinguishers. You should not rely solely on your automatic system. By keeping portable fire extinguishers, you can still put off the fire in case the automatic system fails.
  • Communicate your safety protocol clearly to your staffs. Define a set of safety procedures on cleanliness, smoking, and storage of flammable liquids. Make sure you communicate these procedures and enforce them with your staffs.
  • Train your staffs on the fire procedures. Use the time before or after opening hours to train your new staffs on how to react when there is a fire. You should include how to use a fire extinguisher and fire evacuation plan. You may also want to conduct a refresher course for existing staffs.

As an additional protection, you should also purchase some form of fire insurance or property insurance. The insurance company will reimburse you for your losses when a fire breaks out and any damages to your property

2. Breakdown of Equipment

Kitchen Equipment

Apart from fire, another risk that most restaurant owners fear is the breakdown of equipment. Equipment is necessary to prepare food. Considering that a typical restaurant operates more than 10 hours a day, it is possible that a breakdown of equipment can occur at the peak period.

Here are some tips to minimise the risk of equipment breakdown:

  • Always refer to the owner’s manual. Most equipment has their dedicated owner’s manual on proper usage of the equipment and maintaining them in its tip top condition.
  • Make use of the warranty. If the equipment comes with a warranty, remember to fill out and return the warranty card.
  • Clean your equipment daily. Schedule an end-of-day cleaning of your equipment to remove dirt, grease, and food scraps.
  • Schedule to clean your equipment thoroughly on a regular basis. Daily cleaning is not enough. A thorough cleaning includes cleaning places that are hard to reach. You may even need to disassemble your equipment and clean each part separately. Hence a schedule to clean your equipment is necessary
  • Train your staffs on the proper use of the equipment. One common reason for defective equipment is misuse. Always train your staff on how to use and clean your kitchen equipment.
  • Perform regular inspection and testing on your equipment. When you are cleaning your equipment, look out for rust, wear, tear, or water leakages. Being able to spot small issues quickly can avoid a bigger malfunction in the future.
  • Have a backup equipment or spare parts. If the equipment is not costly, have a backup equipment, or spare parts can ensure your business operations continue even if your equipment breakdowns.

You can also purchase extended warranty on key equipment that is expensive and critical to your restaurant.

3. Theft

Restaurant Theft

Theft is a risk that might happen when there is a dishonest employee. You should have a good internal control system that enable you to prevent or detect theft when it occurs.

You can prevent or detect theft with the following internal control tips:

  • Always give your customers a print receipt. To take this further, offer a gift if they did not receive a receipt from the cashier. This will force the cashier to print the receipt with the correct transaction details.
  • Reconcile your records daily. Always reconcile the beginning cash, transactions for the day and ending cash. You may also want to keep track of your inventory if your system can detect the changes during the day.
  • Ensure proper handing and taking over, especially the cashier. Schedule a handover during the non-peak hour. In the presence of the manager or yourself, ask the handing over cashier to count the cash, and the taking over cashier to verify the cash amount.
  • Keep big notes in a safe. Transfer big notes, like S$50 to a secure area after the peak hours. The cashier most probably does not need these notes for change.
  • Always check your suppliers when making payment. Make sure you identify the supplier.

Another way to manage this risk is to transfer the risk to insurance companies. There are some business insurances provides coverage for theft. A dishonest employee can be covered under fidelity guarantee insurance.

4. Food Contamination

Food Contamination

As a restaurant, the most basic and critical promise you make to your customer is food safety. Unhygienic food practices must not be tolerated. The consequence of food poisoning your customers can lead to a lawsuit, reputation loss or even suspension of business.

We have the following tips to help you get started with your hygiene policy:

  • Ensure personal hygiene from your staffs who are handling food. Educate your staffs the importance of personal hygiene, which includes washing their hands and exposed arms. They should also cover exposed wounds or cuts. When drying their hands after washing, they should use a disposable towel.
  • Clean your equipment daily, especially those that handle raw food. Raw food has the highest risk of contamination. Ensure that your staff cleans your kitchen equipment daily.
  • Separate contact surfaces between raw and cooked food. Use different chopping board and equipment to handle raw and cooked food.
  • Clean the gaps between your kitchen furniture and equipment. Food can easily trap inside the gaps. They can attract pests such as cockroaches, flies and mice if they are not cleared. You can either sealed up these gaps or check the gaps daily to ensure there is no food inside.

A lawsuit against a restaurant because of food poisoning can be damaging. You can transfer part of the risk to insurance company using product liability insurance.

5. Employees’ Injuries

Fire Accident

Injuries in the kitchen are common. Under Work Injury Compensation Act, employers are liable for compensation for work-related injuries.

Here are some tips to minimise employees’ injuries:

  • Ensure proper training and supervision for new employees. Never assume your staffs know how to use certain equipment. Always train them and supervise their use of equipment until they are ready.
  • Provide proper clothing, shoes, aprons, hairnet, and gloves. Proper uniform such as cut-resistant gloves, slip-resistant shoes can reduce injuries from falling and cut.
  • Clean up spills immediately. Falling in a kitchen can be dangerous. In addition to slip-resistant shoes, clean up any spills immediately.
  • Ensure clean hygiene and behavior. Relating to food hygiene, always ensure clean personal hygiene. Never allow your staffs to eat or smoke in the kitchen. If your staff is sick, keep them at home and away from the workplace.

If you have staffs that are paid below S$1,600 or involve in manual work, a Work Injury Compensation (WIC) Insurance is compulsory. You can check out our article on WIC insurance for more details.

About Anthola and Tokio Marine’s Restaurant Insurance

Anthola Pte Ltd is an authorised general insurance agent for Tokio Marine Singapore. We have more than 30 years experience in advising our corporate clients on their insurance needs.

While taking action to minimise risk events from happening is important, sometimes these risk events may still occur. Therefore, there is always a need for insurance to transfer the risk.

Tokio Marine Singapore has a business insurance package for restaurants. This business package is known as TM Dining Suite.

The TM Dining Suite provides coverages for:

  • Property All Risks: Cover for your renovations, contents and stock-in-trade. This will cover both fire and equipment breakdowns.
  • Business Interruption: If your business is interrupted due to loss or damage of premise or equipment, you will receive daily cash up to 100 days.
  • Money: Covers the cash in your premises during business hours that are secured in the cash register, locked drawers or locked safe.
  • Personal Accident: Coverage for 2 owners/partners at $30,000 per insured person.
  • Public Liability: Covers your legal liability for accidental bodily injury &/or property damage to third parties occurring anywhere in Singapore in connection with your business.
  • Work Injury Compensation Insurance: Provides statutory coverage for your employees in the event of work-related injury.

There are also several add-ons such as Fidelity Guarantee, Goods-in-transit insurance, etc. that you can include in this package.

You can find out more about TM Dining Suite in this brochure. Feel free to contact us if you have any question regarding your insurance needs or quotations.


This article shows you 5 of the most common risks a restaurant faces in its business operations. Fortunately, you can minimise the probability of these risk events from occurring with tips in this article.

Prevention is always better than cure.

But, despite your best effort, sometimes these risk events may still happen. That’s why you will need an insurance to transfer these risks.

If you are interested in insuring your restaurant, please do not hesitate to contact us for a free consultation and quotation. We love to speak to you!

Contact Us for Free Consultation

Or call us at +65 6298-6222.