Last month I closed my office for a few days and took the staff to the Northeast Pizza Expo. We took a booth and exhibited right alongside industry giants.
While others were busy hawking their wares, I quietly corralled pizzeria owners as they walked by and I asked them this one simple question: "What's the single biggest problem you have? The thing that keeps you awake nights?" They all said it was 'Delivery Liability' and the cost to insure the exposure.
It seems that this one just won't go away! Well, given the current climate in the insurance business (Stormy with periods of severe disruption) it seems that we need to go back to school and revisit INSURANCE 101 to get a handle on this.
There are proven ways to deal with risks. Prestigious East Coast business schools teach entire courses on this subject. Lets apply the battle proven risk management process to the delivery liability problem. In the process we will discover some options to consider – some will work for you, and some will not. It really is not a one size fits all process.
The Five Step Process Revealed and applied to the Delivery Liability Monster
First Things First: IDENTIFY THE RISK.
Every time you send out a delivery, you are responsible for what happens. If your driver runs over a flowerbed , you are responsible. If you driver 'taps' a parked car, you are responsible. If the nightmare happens and there is a serious accident you are responsible.
(NOTE: It is true that your drivers insurance (if any) comes into play first, but there are some very real questions that can cloud this issue and I don't suggest that you rely on this as your only insurance!!!)
Second: QUANTIFY THE RISK
In other words, how much do you have to loose? What's the worst-case scenario? Well without too much imagination, we can dream up some horrible scenario or you could pay to have a 'verdict search' done to get a hard dollar range of settlements, but no matter what, I think its fair to say that it's a really large risk.
Third: ELIMINATE THE RISK.
Here's the most simple way to do it. Just don't deliver. Now this solution has worked for some pizzeria owners, however, it just does not seem to make sense for the majority of pizzeria owners. Delivery is an integral part of the biz, like it or not.
Fourth: RETAIN THE RISK.
If you have the deep pockets, retain (keep) the risk yourself. Just pay the claims if and when they happen. Now, that just is not a viable option for 99.999 percent of the pizzeria owners out there. Even the publicly traded giants don't do this so how can you?
Fifth: TRANSFER THE RISK.
This is where it gets interesting! You have several options here and each of them may be viable to different pizzeria owners. Lets explore some risk transfer techniques.
Contract out all delivery: There are services that do nothing but deliver. They will pick up on your call and do the delivery for you. Some charge a fee and some 'buy' the food from you and "resell" it for a profit. This is one option.
Joint venture: You can joint venture with someone who has a similar operation, like a drug store, to accommodate your needs. They would use their people and vehicles and deliver for you. You could also get several non-competitive peers together and form a separate company to perform delivery services for you all.
Hybrid: You can take a little bit of each of these strategies and combine them into one comprehensive program:
- You might tighten up your delivery zone and contact out all longer distances and combine that with a discount for pick up from those areas.
- You might get a few of your non-competitor friends on a 'fringe' zone and share orders when they overlap.
- You can seriously explore the concept of forming a delivery company that uses drivers with their own vehicles and charge for the delivery (some of the "Big Boys" are doing this now!) Finally: You can continue with the traditional format – having your own people deliver with their cars and then go "full blast" on a "serious as a heart attack" program to reduce your risk:
- Have all drivers bring you a Motor Vehicle Report every three months and you pay for it.
- Give 'incident free' drivers a safety bonus each month . Make it meaningful and make a big deal out of it .
- Communicate to drivers just how much safe driving means to you – constantly!
- Sign up with a "HOW'S MY DRIVING" reporting service.
- Adopt a zero tolerance policy for unsafe driving behavior and enforce it – even if it means firing your brother's kid!
The bottom line is this is about you, your business, your family, your retirement and your life. The reason this issue is such a problem is this is a really big problem! If you don't think this is really important, contact your lawyer and your CPA and show them this article and see what they say. I can almost guarantee what they will tell you! I am so serious about this topic that I make you this standing offer – If any pizzeria owner is still confused about how important this is, call me at 201-945-3100. I'll take the time personally to discuss this with you. If I can't help you on the spot, I will contact one of my colleagues to get state specific help where needed.