The risks and insurance you need to know about when setting up a farm shop
Opening a farm shop is an increasingly popular way for farms to diversify, there are currently around 4,000 farm shops dotted around the country. But, as with any business venture, there are risks involved. We guide you through how you can make sure your customers and employees stay safe when setting up your farm shop.
- Farm shop food safety regulations
- Licensing requirements
- Access and layout
- Your employees
- The level of financial investment required
- What are some of the other insurance policies to consider?
What are the risks involved with operating a shop?
You’ll need to consider the safety of the general public, as well as any employees, from the very outset when setting up your business. Decisions you make in the early stages of planning, such as the access requirements for the shop, can have ramifications later down the line when it comes to providing a safe environment. Some of the things you will need to consider include:
Farm shop food safety regulations
There are several food safety regulations you’ll need to follow which will cover the way food is stored. This includes making sure produce is temperature controlled and that any food prep areas are managed hygienically.
You’ll also need to follow strict regulations when it comes to food labelling, such as listing all ingredients and specifying use by dates.
For details of the rules you’ll need to work to, speak to your local authority’s environmental health department. They’ll be able to help you with queries about food hygiene standards and tell you what’s expected. Your local trading standards office can also help with understanding food labelling requirements. The Food Standards Agency also has a section dedicated to business guidance.
You may also want to consider a product liability insurance policy, to protect you in the event of a claim as a result of a product that you have sold. In particular, this type of policy can provide cover for claims of food poisoning if you’re found to have been unintentionally negligent i.e. accidentally not following food safety standards.
As an owner of a business that stores, handles, prepares or sells food to the public you will need to register for a food business license with your local authority. Registering for a licence allows the local authority’s Environmental Health Officer (EHO) to inspect your premise and ensure that you are complying with all the relevant health and safety standards and that your business isn’t endangering the public.
Some of the risks that an EHO will be inspecting include:
- Food preparation areas. Assessing that they are safe working environments with equipment that is not dangerous to use. They will also be looking to make sure that food hygiene regulations are complied with.
- Both within areas open to the public and also areas only accessible by staff.
- Staff competencies. Have staff completed food hygiene training? Are they able to use the equipment safely without endangering themselves or others?
- General standard of the food being sold. Is anything being sold outside of its use by date? Is the food on offer of a standard fit for human consumption?
Registration is free and you can’t be refused but you do need to register and apply for this licence 28 days before you open. If you’re already open, you should apply as soon as possible. You can find out more at GOV.UK or from your local authority’s website.
Access and layout
Your farm shop needs to be accessible so think about signposting, car parking, and disabled access. You will also need to consider the layout of the shop to make sure that it is easily navigable for all and reduce any identified risks. This could include things like;
- Reducing uneven surfaces;
- Preventative measures for slippery flooring when wet;
- Storage of cleaning materials and chemicals somewhere that isn’t accessible to the public.
- Signposted fire escapes and an appropriate assembly point.
Public liability insurance is often recommended for retail businesses as it will provide you with cover for legal costs and compensation if a member of the public takes you to court.
Read more: Reducing and insuring against farm fire risks
Arguably one of the biggest risks to any business, your employees present a danger to the viability of your enterprise. It’s important that you consider the human factor when setting up your business and the potential claims that could arise from this.
As an employer, it is a legal requirement to have employers’ liability insurance. This policy provides cover for employee injury and sickness if they’re hurt or become ill because of work. If you need employers’ liability but get caught without it, you face being fined £2,500 for each day you’ve been without cover.
You will also need to set up and contribute to a workplace pension for your employees, as well as paying National Insurance contributions.
The level of financial investment required
Setting up any business will require a certain level of financial investment on your behalf. When working out how much money you will need to put in consider the following:
The state of property you will be operating out of
Will it need a lot of work to get into the state you want? You will also need to consider the outside of the property too, such as parking space and access to the road.
After investing in the property, you will want to protect your investment. This is where business premises insurance can prove useful. This will cover the farm shop building, including any permanent fixtures and fittings. If you’re using an existing building it may already be covered under your existing policy. However, you should always let your insurer know about a change in use to avoid your policy becoming void.
Stock and equipment
Will you need things like chiller cabinets and ovens in the property which can be expensive pieces of kit? You will also need to have the money available to invest in stock for the business. It can also be wise to take out stock and contents insurance which will compensate you for damaged or stolen stock (based on cost price, not retail price). If you keep refrigerated goods onsite, you’ll also be able to cover this within your policy too. Remember to increase the sum you’re insured for if you carry increased levels of stock over seasonal periods, such as Christmas.
Sufficient cash flow until the shop turns a profit
On average, it can take two to three years before a business becomes profitable. You’ll need to make sure you have enough cash flow to keep the business operating until you start to see a return on your investment, this includes things like, staff wages, utility bills, insurance premiums, maintenance of the property and stock replenishment.
There are insurance policies you can take out to help protect cash flow including business interruption, credit insurance and key person insurance.
What are some of the other insurance policies to consider?
If you’ve already got farm insurance in place, you should be able to add on additional features that will cover your food business. If not, or you want to keep each business separate, you’ll need a shop insurance policy instead. Policy features and options to consider, include:
Business interruption insurance
This covers loss of income if you need to close the farm shop because of an event you’re insured for (for example, fire or flood).
Money and outstanding debts insurance
Covers any money on the premises. Policies can also cover debts you can’t collect if business records are lost or damaged.
Commercial vehicle insurance
If you deliver goods to customers, you’ll also need to think about commercial van or car insurance. Your policy should include carriage of goods for hire and reward which enables you to transport goods in your vehicle in exchange for money. It’s also worth considering goods in transit insurance which covers the specific items you carry.
Farm and farm shop insurance to suit you
At Alan Boswell Group, we appreciate that all businesses are unique. This is particularly true when it comes to farms and the diversified activities you might choose to carry out. That’s why we take a tailored approach to insurance, ensuring that you get exactly the cover you need for the greatest peace of mind.
For more information about how we can help with your farm insurance needs, contact a member of the team on 01603 218000.