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Getting control of insurance costs

Year after year, Tim Edwards, a partner at two-unit Florida casual concept Fudpucker's (not to be confused with burger chain Fuddruckers), watched as his insurance costs took huge bites out of the company's profits. Worker's comp was perhaps the biggest offender, as staffers repeatedly were victimized by what appeared to be avoidable pratfalls, and Fudpucker's was repeatedly victimized by rising insurance rates.

Then Edwards got wise. An insurance agent who specialized in worker's comp —and who was a regular at the beach-themed restaurant—caught his ear about a program, called a loss-sensitive plan, that gave the operator strong financial incentive for minimizing worker's comp claims. So Edwards set about making his restaurants safer: he mandated no-slip safety shoes for all employees, and put stronger treads, effective in both dry and greasy conditions, on the stairs. He increased the lighting in the front of the house, replaced swinging doors in the kitchen, and laid down throw rugs in high-slip areas.

Suddenly, the worker's comp claims at Fudpucker's, which employs around 250 (with another 200 in-season), started to nosedive. "We had only one major claim in the past year," Edwards says. "The program has saved us $30,000 to $40,000 this year."

But Edwards' mission went beyond making the restaurant safer to work in. He also overhauled the way Fud's viewed and managed accidents. Managers began receiving safety training, which was (informally) passed along to hourlies. Managers were also forced to file extensive reports for each accident, including all witnesses, which served a variety of functions: The reports gave investigators more ammunition for sniffing out fishy claims (Edwards says they investigate claims with the zeal of much larger companies), they gave management a blueprint for preventing future accidents, and they sent the message that Fudpucker's was intensely focused on making accidents almost obsolete.

"The reports really reinforce the mindset throughout the restaurant that we take accidents very seriously," he says.

Edwards also gave managers a financial incentive to minimize claims. Instead of lumping worker's comp in with the company's general expenses, he moved it over to the labor column on the ledger, which directly affected the size of the bonuses his managers brought home. "If a staffer has a big accident now, it affects the manager's pocketbook," he says.

Fudpucker's also minimized claims by paying a little more to keep managers on board, knowing that high turnover meant a better chance of someone attempting to exploit worker's comp. "People that have been loyal to the company for years are not looking for the free meal ticket," he believes.

Edwards also works with the insurance provider to run a worker's comp history check on new hires, and root out the ones who appear to be cheating the system. He also reserves the right to drug-test employees, who know full well they might be peeing in a cup should they file a dubious claim.

"Before, we'd have an accident and say, that could've been avoided if we did things differently," says Edwards. "Now we're doing those things differently, and it's saving us lots of money."

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