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Liability claims down, customer loyalty up with successful gift-card program

Posted On: Apr. 10, 2016 12:00 AM CST

Liability claims down, customer loyalty up with successful gift-card program

A decision in 2011 to bring general liability claims handling in-house, including a program that gives gift cards to potential litigants, has helped Texas Roadhouse Inc. save $1.2 million a year in liability claims costs.

The restaurant chain used a third-party administrator for seven years to handle its general liability claims, which often arose from situations such as when customers slip and fall at a restaurant. But Patrick Sterling, senior director of risk and legendary people, said he and his team realized that Texas Roadhouse employees would be better suited to handle claims and complaints from restaurant patrons.

“Our adjusters have a guest service mentality first,” Mr. Sterling said. “How can we win that guest over and keep them as a guest? That is always our approach.”

The decision is touted as one of the largest successes of Texas Roadhouse's 12-member risk management team. In addition to cutting liability costs, moving liability claims handling in-house has reduced the company's rate of new or pending liability litigation by 50% since 2011, according to company data.

General liability losses have fallen to $1.28 per $1,000 of revenue in 2011 from $3 per $1,000 of revenue in 2004, according to company data. The company estimates that it has saved $4.95 million in general liability costs in 2014 and 2015.

As a result, Texas Roadhouse's general liability insurance rates have fallen 67% since Mr. Sterling came to the company in 2004.

Mark Simpson, who is vice president of legendary people and handles human resources for Texas Roadhouse, said the in-house liability program has succeeded in part because Texas Roadhouse has worked to establish a “family” culture where employees — called “Roadies” — care about the company and their co-workers. Because of that, he believes Texas Roadhouse's liability claims team has a vested interest in making things right with unhappy customers.

“We have Roadies that are answering the phone with the Texas Roadhouse shirt on every day that love their jobs,” Mr. Simpson said. “And when a guest calls in and has an issue in our restaurants, they're getting true care and concern from somebody who cares about the restaurant.”

A highlight of Texas Roadhouse's general liability claims handling includes providing Texas Roadhouse gift cards to unhappy customers. The card amounts usually match the value of a patron's check at a restaurant, and can range from $25 to hundreds of dollars.

Texas Roadhouse does not require customers to sign a liability waiver to receive a gift card settlement, said Britt Roarx, senior claims manager for Texas Roadhouse. Instead, the company sees the settlements as a chance to make things right with customers who have often been loyal to the restaurant chain.

“That person is spending money in your restaurant, and you would want them back at some point in time to continue to be your guest,” he said.

Nora FitzGerald Meldrum, associate general counsel with Texas Roadhouse, said the company is comfortable providing gift cards as a mea culpa for a customer's accident or poor restaurant service because it allows customers to feel that their concerns were heard.

“Fortunately, we've got great guests out there who love us,” Ms. FitzGerald Meldrum said. “They're happy to give us a second chance if we've fallen down.”

Customers who receive gift card settlements also tend to receive the “red carpet treatment” when they return to Texas Roadhouse after an incident, Mr. Roarx said.

“We'll go so far as to call the managing partner at that restaurant and say, "Hey, we paid this claim with a gift card, so they'll be becoming back to see you,'” Mr. Roarx said. “So when they do, (we) treat them like a king.”

The company's in-house claims handling also allows Texas Roadhouse to track liability claims and potential claims internally to determine whether certain restaurants need to ramp up their safety efforts or improve their service.

“We can circle back very quickly, partner with our operators and develop new programs and tools that will help us be successful,” Mr. Simpson said of being able to use internal liability claim data to drive restaurant improvements.

“We look at it as a loss prevention effort,” Mr. Roarx said. “We're talking to our facilities managers. We're talking to our managing partner at the restaurant, and we're saying how do we actually fix that problem so we don't have any more guests injured?”