Our members are primarily Personal and Private Chefs, small catering companies, culinary instructors, small food producers making a variety of food items for sale at farmers markets and community events (incl. sauces, salsas, pickles, baked goods, spice blends, ethnic foods, juices...), meal prep/ mise-en-place services, prepared meal services (drop off and pick up) and menu planning services.
If they were to go to an insurance company directly for a liability insurance quote, how much would they typically be looking at for CGL (Commercial General Liability Insurance) for $1,000,000 coverage?
A simple CGL policy will cost approx. $1,500 per year for the insurance alone if they were to go directly to an insurance company. In light of COVID-19, however, insurance rates have sky-rocketed across the board, so the cost will likely be much higher.
Because of The Chef Alliance's history and having members all across Canada, they can offer a similar insurance coverage for less than this with other benefits of membership included. The fact that The Chef Alliance is doing what they can to keep the cost of insurance low for their members, often by absorbing the increases in the cost of insurance themselves, rather than passing the higher cost on to their members, is very impressive.
Megan's previous insurance company had increased the cost of insurance by almost 100% due to COVID-19.
For less than the cost of her previous policy, she was able to get the same level of insurance coverage
as well as membership in The Chef Alliance.
"Thank you so much Sonia! This program is PERFECT for me"
We are often contacted by small businesses who want to sell their food products in supermarkets, restaurants and retail stores - items such as jams, jellies, salsas, pickles, spice blends, baked goods etc. Selling to a 'middle-man' who then sells to the end consumer is not covered by our membership insurance. What information would an insurance company require in order to provide a quote for CGL (Commercial Liability Insurance) to these small businesses who want to go the retailer route?
Business experience will dictate a lot in terms of price of insurance. At a minimum, an insurance company would need to know the following and the answer to these items will, to an extent, dictate price:
- Resume – including applicable training
- Business Plan
- Address of commercial kitchen
- Description of the kitchen operations and food handling operations
- Label with ingredients thaw ill be used on packaging
- Product description
- Approx. annual revenue
- Copy of contracts with potential vendors
- Description of product flow to customer, I.e. how many other businesses/ hands (e.g. wholesaler, distributors, trucking company for shipping etc.) will it flow through before being purchased by the consumer?
What else would a start-up food producer need to consider if they want to sell to retailers rather than direct-to-consumers?
For those who want insurance to sell a food product, they will need Products Liability insurance and the minimum cost is $2500 per year. If they are selling on-line and/or selling to the USA or around the world, then the cost will be much, much more. After COVID-19, these costs could be much higher.
If a start-up food producer decides to proceed with their business model, selling to retailers or distributors, how much insurance coverage will they need?
Typically the vendor (i.e. the retail store) dictates the coverages and limits they want their suppliers to carry. Loblaws, for example, wants at least a $10,000,000 limit and has contract covenants that require you to carry high limits for Products liability. You would also want to consider coverage items such as spoilage, contamination, products and completed operations,
What advice do you have for start-up food producers?
I would tell them they need to go small for a few years to build experience, as they would never be able to afford insurance otherwise. Once they are ready, before they start they should find out from their prospective retailers what they require from an insurance perspective. There is no point getting $5,000,000 coverage if the retailer requires $10,000,000 coverage.
In addition to insurance, most retailers will require that new businesses 'buy' shelf space in their stores; this cost could be in the thousands of dollars. Nothing to do with insurance, but definitely something to consider.
What about selling food products at farmers markets, event booths and so on? Is insurance really necessary
Of course it is. A claim can come from anywhere - and just because you sell at a small booth or stall with little investment (compared to a retail store) doesn't mean there can't be a claim against you for damage or illness. CGL is usually fine, and many markets and events will ask that their location be added to the certificate of insurance as an Additional Insured - this protects them if they are also sued for a food product that you sold at their location. The coverage offered by The Chef Alliance is adequate for this type of business.
Many commercial kitchens ask our members to add them as an Additional Insured. Is this normal?
Yes this is normal. Commercial kitchens, food incubators, ghost kitchens etc. are becoming more commonplace. They allow small businesses to rent inspected commercial kitchen space for a few hours at a time. They ask for this [to have their facility/name added as an Additional Insured] so that if there is any damage to their property, they know that the insurance will help offset any costs.
Some commercial kitchens will offer insurance as an extra fee that is added on to the basic cost of renting the space. This is often at a much higher rate than if the entrepreneurs were to get insurance coverage through an organisation like The Chef Alliance or directly through an insurance company.
"Liability insurance is not optional in foodservice"
Any other advice for entrepreneurs thinking of getting into the foodservice industry?
Of course - we don’t have a society anymore where one can make cookies at home and sell them without liability insurance - society doesn’t even allow kids to have lemonade stands anymore! Liability insurance is not optional in foodservice. The risks are just too high to offer a food product(s) or food-related service(s) without the protections that insurance offers.
Liability insurance is one of the first things that should be researched when looking to start up a foodservice business or service. If you "can't afford" liability insurance, then you shouldn't be starting up this type of business. Having insurance protects your livelihood and your assets should something go wrong, or should someone get sick. You're putting your mental health and financial future at risk should there be a real or even a frivolous claim against you or your business.
The Chef Alliance is a leading foodservice association in Canada offering Chefs and Entrepreneurs a place to grow their business. They can benefit from liability insurance to protect their clients and finances, peer support strengthen their business, discounts to lower their business costs, market their services and increase profits. This leaves them time to concentrate on what they do best - cook great food!