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Restaurants eyeing retail: To insure or not to insure?

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Question:

We are signing with a co-packer to make a sauce. The co-packer has all necessary certifications and insurance. Our company only has myself and my business partner—do we need additional liability insurance for any reason?

– Judy, Minden, Nev.

Answer:

You are already one step ahead in working with a co-packer. Many restaurant operators want to enter the retail or foodservice marketplace with a packaged product like a sauce, pickle, or spice blend. After all, you make it every day and people love it—why not sell it at the supermarket?

The reality is food manufacturing is a different business from foodservice, with different regulators, a different skill set, and a different—and often higher—set of hurdles to get to market. Using a co-packer whose expertise is on the manufacturing side is definitely a sound strategy.

To your question, I believe the expression goes something like, “No one thinks they need insurance until they need insurance.” Your insurance agent will be happy to hear that you have an approved manufacturer making your product and taking responsibility. That confidence should be reflected in your premium. Further, since you are not insuring a building, trucking fleet or plant, as many manufacturers would, the costs should be modest. However, I definitely advise you to research both product liability and general liability insurance. Remember that even if you are not responsible for the safety of a co-packed or licensed product, someone who might want to sue you will try to sue everyone they can—the suppliers, the manufacturer, your brand and so on.

As always, talk to your attorney and insurance agent, but my advice would be better to have insurance you don’t need than to need insurance you don’t have.

More on liability insurance for restaurants here

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