Restaurant business offers appetizing potential

Restaurant business offers appetizing potential

Surrago, James


Finding it difficult to stay on a healthy diet? Feel like every time you turn around, there’s another restaurant or eatery staring you in the face? There’s good reason it seems that way. In terms of numbers of establishments, restaurants-from fast-food eateries to elegant dining facilities-are the largest industry in the United States.

More than 420,000 restaurants operate in the United States. Those businesses represent more than $3.2 billion in annual premium, employ more than 7.3 million people and have an all-lines loss ratio of 62.80/c–by any measure, it is a large, important market segment to the insurance industry.

Another measure of this segment’s importance to the insurance industry is that approximately 80 to 100 restaurant-specific insurance programs already exist, with additional programs frequently being introduced.

Given the restaurant industry’s large employment base, it is not surprising that workers compensation premiums represent nearly 41%or $1.3 billion–of the $3.2 billion total. General liability premium, at $1.3 billion as well, represents another 41% of the total. Property, commercial auto and boiler & machinery represent the remaining 18% of this market’s premium. Employment in the industry has grown from approximately 6.4 million in 1994 to about 7.3 million in 1998, and is projected to grow to 7.7 million by 2001. That represents real growth of more than 20% over the eight-year period.

According to ISO data, the restaurant industry has a high concentration of small and medium-sized accounts. In fact, 90% of the 7.3 million employees in the restaurant industry work for restaurants in the small and mediumsized categories. And 92% of the $3.2 billion in premium comes from small and medium-sized restaurants.

More than 290,000 small restaurants (with fewer than 20 employees) do business in the United States, a market representing $950 million in premium, 60% of which is in restaurants employing between 10 and 19 people. Roughly 120,000 restaurants are medium-sized accounts, employing between 20 and 99 people, representing a market worth $2 billion in premium. The average premium is $3,200 per account for small establishments and $16,300 per account for medium-sized restaurants.

In the Rough Notes Midwest region, about 75,000 restaurants employ nearly 1.4 million people and represent $591 million in premium, or 2.6% of the region’s total insurance marketplace. The region has 50,000 small accounts representing $161 million in premium for an average of $3,219 per account. Medium-sized accounts number just under 24,000, representing $385 million in premium, for an average of $16,114 per account. Together, the small and medium-sized businesses account for 92.4% of the total restaurant premium in this region, slightly more than the countrywide average.

At 62.0%, the Midwest region’s loss ratio for this business is marginally better than the countrywide average. Workers compensation premiums are 44% of the $591 million total restaurant market, slightly higher than the countrywide average of nearly 41%. General liability premiums represent roughly 41% of the region’s total market. Commercial property, at 12% of the total restaurant market, represents a below-average proportion of the Midwest region’s total restaurant premium.

Information on this and other niche markets is available from ISO by e-mail at or by calling toll-free: (800) 888-4ISO (4476).

Copyright Rough Notes Co., Inc. Jan 2001

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