What Happens When a Restaurant is Linked to a Disease Outbreak?

What Happens When a Restaurant is Linked to a Disease Outbreak?

The restaurant industry is known for unique risks. Predominant among these risks is the possibility of a foodborne illness outbreak. According to the U.S. Centers for Disease Control and Prevention (CDC), about 48 million Americans get sick from a foodborne pathogen each year, resulting in approximately 3000 deaths annually. While not all of these disease outbreaks stem from restaurant services, the effects on the restaurant industry can be devastating. Specialty insurance providers like U.S. Risk Underwriters know that restaurants face significant challenges in the face of a disease outbreak, potentially costing millions of dollars in business interruption, legal claims, and sanitation expenses.

Foodborne Disease Outbreaks: The Costs

There are about 2500 known pathogens that can contaminate food and beverage products, resulting in millions of illnesses each year. Highly-publicized disease outbreak cases appear in the news on a weekly basis; large restaurant chains like Panera Bread have been affected in recent months. Restaurant industry sanitation standards and a food safety management protocol known as Hazard Analysis and Critical Control Points, or HACCP, have helped to reduce the number and severity of disease outbreaks, but the risk looms large over the industry. What does a disease outbreak actually cost the restaurant industry?

To answer that question, a team of investigators from the Johns Hopkins University Bloomberg School of Public Health conducted a study, simulating a range of different types of illness outbreaks using common pathogenic culprits like E. coli, norovirus, listeria, and salmonella bacteria. In the study, different scenarios were modeled to determine just how an outbreak affected restaurant operations. Some of the findings of the study were staggering:

  • A fast food restaurant with a small-scale illness outbreak could expect to incur costs as little as $4000 or as much as $2 million.
  • The average cost range for fast-food and casual dining restaurants facing a disease outbreak is $6330 to $2.2 million.
  • For fine-dining restaurant establishments, a disease outbreak can result in a range of $8030 to $2.6 million in costs, on average.

Published in Public Health Reports in 2018, the study demonstrated that restaurants implicated in foodborne disease outbreaks may see devastating costs associated with legal claims and fines; outbreaks can cost a restaurant between 0.3% and 101% of their annual revenue.

Handling Foodborne Illness Outbreaks: Preparation and Aftermath

It is imperative that restaurant operators take foodborne illness risks seriously. Failure to do so can result in millions of dollars in unforeseen expenses, including lawsuits, regulatory fines, cleaning costs, and lost business revenue. The first step in mitigating foodborne illness risks is to start preparation long before an outbreak occurs. It is critical to rigorously train employees on safe food handling practices. The National Restaurant Association offers an online course on food safety, which costs restaurant owners about $15 per employee. This investment in safety is a small fraction of what it may cost if a disease outbreak were to occur.

If an outbreak does happen, restaurants must discontinue operations immediately as well as notify regulatory authorities promptly. This helps to minimize risk exposures, especially in long-term business loss, and signals that the restaurant is diligent in its efforts to resume operations.

Hospitality insurance is the foundation on which restaurants and food-service establishments can protect business assets and personnel. U.S. Risk Underwriters, a leading specialty insurance firm, offers restaurants a range of tailored insurance solutions. Programs like Restaurant Illness Guard are designed to reimburse restaurant operations for the expenses resulting from a foodborne illness outbreak, including crisis management, equipment and facility cleaning, and loss of income. With adequate training and adherence to established food safety standards, food-service operations can protect against disease outbreaks. With restaurant liability insurance and crisis management programs, restaurants can rest assured that their assets are protected even if an outbreak were to occur.

About U.S. Risk

U.S. Risk Insurance Group, Inc. is a wholesale broker and specialty lines underwriting manager providing a wide range of specialty insurance products and services. Headquartered in Dallas, Texas and operating 16 domestic and international branches, U.S. Risk and its affiliates would like to help you access a world of new markets and products. For more information, contact us today at (800) 232-5830.