As more restaurant owners and managers look to grow their sales volume and expand  their customer base by adding a delivery service, they need to understand how this  activity might affect their risk profile and take steps to manage what may be potentially  devastating exposures.


Whether restaurants choose to use their own vehicles and drivers, have their drivers use  their personal cars or trucks for deliveries, or contract with outside third party delivery  services, they need to factor risks involved with each option into their decision-making.  They also need to take appropriate actions to manage any significant related exposures.


Managing employee driver risks

When restaurants use their own employees as drivers, they need to make sure they first  conduct appropriate background checks, including an MVR of their driving records and  any violations. Employee-drivers should also be required to sign agreements regarding  the conditions of their employment, commitment to safe and defensive driving practices,  as well as  consequences for non-compliance, including termination of employment for  major violations, such as DUI, DWI, excessive speeding, road rage, reckless driving,  distracted driving or pattern of inappropriate actions.


At the same time, restaurants should continuously monitor their employees’ driving  performance for any moving violations, accidents or complaints. Drivers should receive  periodic training not only to make sure they adhere to the rules of the road, but that they  understand how to deal with customers and assess and avoid potential situations that  may leave them or their vehicles vulnerable to theft or crime. Restaurants also need to  make adjustments to employee classifications for workers’ compensation, which may  result in a premium increase.


Additionally, when employee-drivers use their own vehicles, restaurants need to make  sure employees have adequate auto liability insurance protection, typically at least  $500,000 in coverage, and report to their insurance companies that their vehicles are  being used for deliveries. Some insurers offer special delivery insurance policies and  excess coverages to address these exposures; the restaurant owner can purchase an  additional $500,000 in excess coverage (above the $500,000 limit purchased by the  employee).     The combination of the primary auto liability coverage purchased by the employee and  the excess coverage purchased by the restaurant can protect both the employee and the  restaurant from what can be potentially substantial liabilities associated with vehicular  accidents and corresponding injuries to pedestrians, other drivers and costly property  damage.


Notably, in some states auto liability coverage is a mandatory coverage for all drivers; in  others, however, liability insurance isn’t a requirement. In either situation, it’s critically  important for the restaurant to make sure adequate auto liability coverage with total limits  of $1 million or more is in place to protect their drivers as well as their establishments.


Restaurant supervisors, managers and employee-drivers also need to make sure any  vehicles used for deliveries are in sound working condition, with regularly scheduled  maintenance, extensive pre-trip inspections and other measures to ensure their safe  operation and performance and reliability.


Company-owned vehicles offer advantages

Rather than have employee-drivers use their own vehicles, more restaurants are using  their own vehicles for delivery. Besides giving them greater control over food quality and  maintenance of vehicles used for their delivery service, the owned vehicles provide  opportunities and signage and branding that enhance their visibility throughout the  communities where many of their patrons and potential customers reside or work.


Another option is to outsource the entire delivery function to third party services.  Although this is increasingly popular, it tends to have high costs and significant potential  risks. Third party services typically charge participating restaurants 35% – 40% of the  retail costs of any food delivered and then add a delivery charge, which is paid by the  customer. Consequently, as much as 50% or more of what customers pay for their food  goes to the delivery service. Restaurants also have a lack of control over quality and  condition of the food on delivery.

Navigating challenges with third-party delivery services

Besides logistical issues, such as food being cold by the time its delivered, restaurants  face potential liability for food-borne illnesses if certain foods aren’t maintained at a  proper heat level. Furthermore, delivery services involved in accidents or other issues  may trigger lawsuits against the restaurant from injured parties and their insurers that  could involve substantial costs and result in enduring reputational damage.


In addition to establishing parameters for acceptable delivery times, restaurants need to  contractually require that any third-party delivery service they use provide adequate  levels of auto liability/delivery insurance and name the restaurant as an additional  insured on their insurance policies.


By understanding and addressing the exposures associated with any of the delivery  options they choose to pursue, restaurant owners and managers will be in position to get  the best results from these services, including greater sales and enhanced customer  satisfaction and loyalty.


For help with evaluating and managing risks related to restaurant delivery services,  contact Restaurant Programs of America at (866) 324-1099. The author may be reached  by email at ​​.

Tony C. Davenport

Vice President

Restaurant Programs of America, LLC