What Small Businesses Can Learn from ASOS Factory Fire

"Fashion website ASOS remains closed after warehouse is devastated in arson attack," read recent headlines in the Daily Mail and countless other news sources.

Reports stated that all ordering had been suspended after a suspected arson attack at the main warehouse that required more than 50 firefighters (and the evacuation of 500 workers) after the fire spread to four floors at the giant distributions center that holds 70% of the company's $270 million in inventory.

The online clothing retailer is now taking orders again, but says that about 20% of its stock was damaged in the attack. The fire and its aftermath also damaged the business's reputation and required a pause in the company's order taking and fulfillment, probable storage and relocation for its remaining stock, and property damage, among other costly impacts.

So what can small businesses learn from events like the arson attack on fashion giant ASOS?

The Asos fire raised fears that the company could be out of operation for a long time. Combined with the loss to property and stock that a company incurs when a disaster happens, a pause in business operations can be crippling to a company's revenue. Acts of Mother Nature, criminal mischief, or other accidents could find you and your business in a similar boat. Power failure from a storm, flooding, fire, hail, wind, vandalism, and equipment damage are just a few of the instances in which business interruption insurance could save your business from damaging losses.

Business interruption insurance can keep capital coming into your company in the event of such disruptions. It covers the loss of income that a business suffers after a disaster while its facility is either closed or being rebuilt. While property insurance covers only physical damage to the business, a business interruption policy covers the profits that would have been earned, allowing a business to remain in the same financial position it would have been in if no loss had occurred. It can help you with:

•    Profits – Replaces profits that would have been earned, and can keep your business 
    afloat if a loss forces you to close temporarily

•    Fixed Costs – Covers operating expenses and continuing expenses incurred by the
    property while a location is temporarily closed, rebuilt, or relocated (such as mortgage,
    advertising, taxes, and salaries)

•    Temporary Location - Some policies cover the extra expenses for temporary relocation
    and advertising fees 

•    Extra Expenses - Reimbursement for reasonable expenses (beyond the fixed costs) that
    allow a business to continue operation during property repair

Asos is now offering discounts of up to 50% as it resumes taking orders, after the blaze forced the closure of its website for two days. They launched a massive summer sale, in an attempt to woo back customers that were affected by the fire and play damage control on its reputation. That’s two full days of lost revenue, combined with reduced revenue from sale merchandise, in addition to the many other areas of business affected by the fire. To no fault of its own, Asos and other companies who incur similar, unavoidable catastrophe have to account for losses in sales and revenue above and beyond the assets lost in the fire - which can be even more damaging to a company's bottom line.

For a larger company like Asos, while the losses are higher than for smaller business, their ability to bounce back is also higher. They have more working capital, credit, and insurance coverage to work with. An unexpected loss to a poorly insured small business can be crippling. 

Asos gave a statement that it is fully insured for loss of stock and business interruption, which will mitigate the impact the fire has on its business and revenue.

Many business owners don’t have business interruption insurance, even though the protection it affords is extremely valuable in cases like these - where the losses are unexpected and huge.

Cost may be a factor in why business owners pass on this coverage, with policies ranging from $750 and up, depending on business size. However, businesses may want to reconsider interruption coverage, based on statistics showing the increasing number of natural disasters. The total has increased from 400 major incidents to more than 600 in a typical year, according to a recent survey from global insurer Allianz.

Some insurance policies that help companies affected by catastrophic losses, are: 

•    Business Interruption

•    General Liability

•    Property

•    Umbrella Insurance

If you’re curious whether your business insurance coverage adequately protects you, or need to add business income to your coverage, please contact John Jacquat at 303.834.1001, or request a free quote or existing policy review on our website.

The Craft Brewer Insurance Essentials

With the exponential growth of the industry, there’s never been a better time to be a brewer in Colorado. However, there are some things you should be prepared for. Protecting your investment is one of the most important strategies for your success. From grower to glass, there are key ways to manage risk during every step of your business to ensure that the inevitable hiccups breweries are likely to run into at some point (a delayed shipment, contaminated batch, equipment breakdown, employee injury) don’t compromise your business or your profits.

Selecting the appropriate insurance is essential for protecting your brewery. From liquor liability coverage to loss control, to data compromise, product recall, property insurance, and equipment breakdown.

To highlight the importance of craft-specific insurance (vs. standard commercial insurance) to your brewery, let’s use a metaphor. 

The Craft Brewer Insurance Essentials:

• The “Domestics”: Here’s a helpful list of The 7 Essential Business Insurance Policies (that you should already have).
• The “Crafts”: Brewer-specific insurance essentials that best protect your brewery’s unique risks from an unexpected hiccup or loss are highlighted in the four P’s, below.

 You went into brewing craft beer because you value quality, plain and simple. You don’t care that it costs more than the other stuff, and neither do your consumers. Why? Because the superior product is worth it. From the raw materials to the packaging, quality is your focus. Insuring your business is no different. You have two options when choosing coverage for your brewery: Commercial (“Domestic”) and brewery-specific (“Craft”). “Domestic” gets the job done, but not with the quality and satisfaction you really want. “Craft” provides the best quality of coverage, customized to your industry: superior protection for a superior product.

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There are four specific areas of your brewery that have unique coverage needs ("Craft"), above and beyond the standard commercial ("Domestic") policy. We’ll call these the four P’s (because it’s catchy), and the things that you most need to protect:

1.     Passion – We’re all in the brewery business for a reason. For most of us, it’s because making great beer is our passion. We are entrepreneurs and enjoy both the freedoms and challenges that come with it. Protecting that passion and its inherent risks is vital to our growth and success. Third party lawsuits and claims against your brewery can put an end to that opportunity in a hurry. 

·      General Liability coverage protects you against third party premise claims.

·      Liquor Liability provides protection against third party claims involving the sale either on or off premise of your product – beer. 

2.     Property – We all know we need to protect our breweries from risks like fire, wind, hail, falling objects, etc. Breweries need several brewer-specific add-ons to their commercial property policy, without which damage to (expensive) equipment may not be fully covered. 

·      Equipment Breakdown extends your property policy to cover loss to property from the sudden and accidental breakdown of machinery and equipment used in your business.

·      Tank Collapse provides financial protection up to policy limits for a loss caused by collapse of a tank due to failure of a pressure relief device. 

·      Tank Leakage provides coverage for a loss due to a leak of finished or in process beer from a tank, vessel, or barrel.

3.     Profits – Most breweries start out making a profit because of our onsite sales or taprooms. Some of us also have distributing risks and orders to fill. In the event of a property loss, your business will be shut down until the property is repaired or replaced. The question is for how long, and how do you recover from that.    

·      Business Income provides coverage for your lost net income and continuing operating expenses. One important point is that the continuing operating expenses includes payroll for your key employees or brewers.  

·      Extra Expense coverage provides funds to ensure you reopen again as soon as possible. For breweries, that might include expenses like renting another location or contracting out some of the production. Since water is such an important ingredient, some insurance carriers provide specific coverage for a loss of processing water if the quality is not there after a loss. 

·      Dependent Properties is property insurance that pays for the loss of income or increase in expenses resulting from damage to the premises of another organization on which your business depends, such as a key supplier or customer.

·      Utility Service Interruption protects your brewery against losses caused by utility outages, ensuring that if lights go out for an extended period of time, or you’re without water, phone, natural gas, or Internet, for an extended period of time, your business won’t suffer.

·      Crime protection covers employee theft, forgery and alteration, theft of money and securities, computer fraud, funds transfer fraud, and loss from accepting in good faith money orders and counterfeit money, in your taproom and beyond. 

4.     People – More than most industries, the brewery industry is about people. We make great beer for people to enjoy, and also try our best to provide a great environment for our own people to work in. We’re required to provide some protection for them (like Workers Comp), and depending on the size of the business, you may wish to provide additional benefits to your team.

·      Workers Compensation

·      Medical

·      Disability

·      Life Insurance   

Other optional coverages to consider, based on your brewery’s unique needs:

• Federal and State Brewery Bonds
• Product Recall or Contamination
• Special Events/Tasting Room
• Supply Chain Insurance
• Data Compromise and Identity Theft Expense

Why choose a brewer-specific insurance agent?

Here’s the thing. I love your beer. Why? It’s delicious, it’s quality, it’s local, and I’m friends with so many of the people creating it. I’m proud to live in the State of Craft Beer, and I want to help it continue to grow at the impressive rate that it has been. So I asked myself, how can I help keep Colorado craft beer so great? By protecting it. That’s my area of expertise, and the way that I can contribute best (other than continuing to drink a lot of it).

I specialize in brewery insurance, customizing coverage to protect your unique business so that you can focus on what really matters: making and selling great beer. My goal is to help protect your exposures at an affordable price, whether you are in the startup phase or an industry veteran who wants to review your existing policies to make sure your thriving business is protected the way it should be.

For a free quote or coverage review, or to learn more about brewer-specific policies that best protect the business you’ve worked so hard for, reach out to me, John Jacquat, at (303) 834-1001 or at john@purerisksolutions.com.