3 Ways Restaurants Deal With Financial Losses From Food Spoilage

The restaurant business is challenging for many reasons, but the aspect that keeps many business owners awake at night is the fragility of inventory. Since restaurants make their money by selling food, spoilage can have a devastating impact on the bottom line. While there are some ways to mitigate the risk of it happening, it’s important to understand the ways inevitable financial losses can be handled.

Tax Deduction

If food is spoiled due to equipment breakdown or power outage, a food spoilage tax deduction can at least provide a tax break for the restaurant. The deduction is considered a loss for the business and therefore can reduce the tax burden for the restaurant.

Charitable Donation

Some foodservice businesses donate inventory about to expire to a local charity. This is a twofold solution in that it moves inventory before it’s inedible and may also confer a tax benefit for charitable donations. Also, helping the community where the restaurant is located is a great way to garner public support and goodwill.

Claims Loss

If food spoilage was part of a covered loss, business owners’ insurance may cover the cost. However, the loss must be caused by a covered peril such as a power outage due to the restaurant being struck by lightning.

Most restaurants will deal with food spoilage as a regular part of doing business. However, there are ways to recoup that loss in certain situations.