How to Cope with Fire Damage in the Retail Space
Unforeseen catastrophic events can manifest themselves in many shapes and forms in any business, including the retail business. Unfortunately, one of the most common catastrophic scenarios is a fire. This is also one of the fastest occurring and most damaging. Unplanned fire events are a business’ worst nightmare. When a fire rips through a commercial location, the damage is devastating. Construction and material costs are as high now as at any time in history, and as a result, rebuilding or new construction is costly. Even for a small space, fire damage can result in costs in the tens or hundreds of thousands of dollars.
These costs do not even consider the loss of physical goods and intellectual property associated with any location. Of course, we can not forget about the expense of lost time? When you are busy rebuilding, you will have less time to serve your customers or close new deals. Unfortunately, the world does not stop moving because of our problems. With a business shut down, it cannot generate revenue. Worse off, the company may receive the sympathy of their current or potential customers; however, customers’ needs do not simply disappear. If the business cannot provide the goods or service, the customer may go to their next option. If they change their purchasing habits and have a good experience at the next option, they may never return to your door. The risk associated with the loss of these opportunity costs and lost customer pipeline need to be accounted for, and fortunately, there are ways to do so.
Hundreds of fire events occur every day in both residential and commercial environments. We all have electricity in our locations, and despite our best efforts and the efforts of code officials to avoid any hazards, things break, and things go wrong – often leading to fires. Like we all have electricity, most retail locations feature gas utilities, which are also susceptible to starting a fire or fueling any fire’s growth. These issues also often arise from negligence or the periodic poor management of a young worker. When it comes to fire prevention, the importance of preparation can not be overstated. Our team can help. We can assist through immediate fire mitigation responses to keep you and your team safe while also allowing your business to get back on its feet in the event of significant damage. Our team can connect you with both damage restoration services and insurance protection. Our fire and damage restoration services will include fire restoration, smoke damage, equipment review, security, and other items. Our insurance services will allow you to custom fit a variety of coverages for your store, your equipment, business loss coverage, intellectual property coverage, business interruption insurance, and other items to keep you safe and protected.
The Changing Landscape of Retail
Before the pandemic, modern retail was experiencing a recent renaissance. While many retail staples of the past had transformed into e-commerce, eateries, and experience, oriented retailers were thriving. Centers catered to these urban and suburban desires by designing new centers with outdoor seating, event areas, and other social interactive layouts that created destinations throughout America. Retail was thought for years to be dead, but it showed the world it was resilient and ready to plant its flag as a sustainable asset class for years to come. In a few weeks, this changed completely. When the pandemic hit, billions of people globally were forced into their homes. Regardless of whether or not they craved these experiences, governments large and small mandated that retailers shut down and people stay away from each other. Within months, gone were the experiences, social events, and other seemingly endless events that had defined our lives for years in the past and what we thought would be years in the future. Since then, hundreds of thousands of retailers have been forced to change their way of life to survive or throw in the towel altogether. How can a restaurant survive at 50% capacity? Much less 25% or 0% capacity. The answer is it is difficult or even impossible. As of now, the end is not in sight, but the pandemic will end at some point, and life will return to normal. Restaurants will re-open, open new locations, and thrive again. So will other retailers, despite the pandemic, and despite Amazon’s ultimate success. That does not mean that we do not need to take into account the tough lessons we need to learn from these experiences. The lessons are to be safe, be careful, and be prepared.
Below are a few options we provide to allow you to rest easy knowing you have a safety net in the event of a catastrophe.
Property Damage:
Problem: Not all business owners also own the physical real estate location; however that does not mean you do not own property. In fact, you do. Often, businesses invest exorbitant amounts into their space’s physical interior construction along with extensive costs for custom equipment, furniture, and other goods to run their operation. Not only that, but you have the physical goods you sell as well as the intellectual property associated with your business. These values often exceed the actual cost of the four walls and the roof of the property itself.
Solution: Business Property Insurance comes in many forms and options for you to pay for damage caused by events such as fires, vandalism, or other events.
Real Estate Property Insurance:
Problem: Fires, hail storms, hurricanes, or even an old tree can quickly turn a beautiful building into a pile of rubble. Whether or not the business you own also owns the building you inhabit does not matter. You need to be sure either you or your landlord are covered by appropriate insurance.
Solution: Real Estate Property Insurance exists to rectify the damage caused by any of these major catastrophic events. You will be given the funds you need to cover replacing a roof, structure, fit-outs, lighting, façade, and/or other items that require major renovation or rebuilding following an unforeseen event.
Business Interruption Insurance:
Problem: The closing of a retail location for renovations, repair, or other circumstances can be deadly to a business. The longer your doors are closed, the more income you lose now and in the future. The longer your doors are closed, the more customers you risk losing. People are creatures of habit. For example, – Americans love coffee. Many have a routine of picking up coffee every morning at their favorite coffee shops or scheduling meetings at these locations. If your coffee shop is closed, these morning pick-ups or periodic meetings may be ok relocating elsewhere for a week or two, however in the event of a lengthy timeframe of those doors not being open, the customer will change their habits and find somewhere else to go. The same goes for fitness locations. People may stay loyal for a week or two, but after an extended shutdown, they will want to work out and will find another place to do so – in their own home or at another competing location. Canceling memberships is a pain, and these customers are less likely to go through that pain to return to the same service they already found elsewhere.
Solution: Business Interruption Insurance (also known as Business Income Coverage) can help you replace the lost revenue due to your shut down.
Relevancy: 2020 was a reminder to not only have Business Interruption Insurance but also to have the right advisor. Thousands and thousands of businesses held business interruption insurance before the coronavirus pandemic; however, only a fraction had the coverage they needed. Policies always include specific items and exclude others. Unfortunately for much of the business world, very few Business Interruption Insurance policies in place before the pandemic had pandemic events in their coverages. Many advisors recommended not including these items or were uneducated about the existence of this pandemic coverage at all. The advisor may not have been financially hurt, but their customers sure were. Those who did not partner with the right advisory firm may have made a mistake they and their business may never truly recover from.
Injuries:
Problem: We live in a litigious world. Let’s face it; not everyone is out to help you out. People tend to look out for themselves, even if it is to the detriment of others. If people can cash an easy check without working for it, they tend to take it. As a result, slip and falls, minor injuries, and technical injuries where you were at fault as a business owner but not practically at fault create a potential threat to your business.
Solution: Business Liability Insurance will assist you in covering the cost of these types of claims. By having this insurance in place, you will not be at risk for a major unforeseen cost due to the actions of a bad actor. In addition, appropriate coverage will cover legal fees and even provide you with recommended legal counsel (at the policy’s cost) to assist you in defending yourself and your business. Remember, lawsuits go far past the actual incident and the actual price of the remedy. Suppose your company looks for a loan or capital raising. In that case, an outstanding unquantified lawsuit may prevent an investor or a lender from providing you the capital infusion you need to establish, grow, or sustain your business. Stay protected, and do not let incidents such as these interfere with your ability to make a living.
Employee Theft:
Problem: There are good people in this world, along with just as many bad ones. Sadly, we cannot trust everyone. In the past, the retail world was a cash business, where employees could easily slip extra dollars into their pockets without you knowing. As purchasing technology has evolved to be digital through credit card or online purchasing, theft has evolved. Digital theft of actual funds or intellectual property is a risk. Other forms of theft include employees forging signatures on checks or selling your trade secrets to competitors. Without protection, you leave your business at risk.
Solution: Business Crime Insurance will provide you the funds you need to stay afloat in the event of these unpredictable events. This insurance, along with guidance and cost coverage that provides you with the appropriate counsel to chase the bad actors and lets the world know not to interfere with your business, or they will see the consequences.
These insurance coverages are essential for survival in trying times. Ensure you are set up with the right advisor who is educated on the appropriate coverages, understands your business, and is fast-acting. If any of these events occur, you need to have the right team behind you to act quickly to provide you the parachute you need as soon as possible. Along with this guidance, we will remind you along the way that businesses need to set themselves up appropriately. A portion of this is operation. Operations need to have appropriate cash on hand while also creating functional flexibility by being set up for drive-thru services, take-out services, and online services to cater to customers who are stuck at home, cautious, or not even allowed to enter your premises. The larger items to consider are paperwork oriented through formal lease agreements and insurance policies. Lease agreements need to give both landlords and tenants flexibility to be able to survive together through times like these. Loan agreements need to follow not far behind.
Most importantly, insurance policies need to be aligned appropriately. The world provides very few life preservers, but insurance is one of them. The reason we keep insurance is to bail us out in the event of a worst-case scenario. If we find ourselves in a bad car accident, insurance is there. If we find ourselves in an incident with hurricane damage, insurance is there. For significant incidents, we have to be prepared as well.
Call us; we are here to help.