Do businesses need reputation insurance? – A Domino’s Pizza case study

February 28, 2024 Insurancepe

Success in the restaurant business is no easy feat. Perhaps the only thing more difficult is living up to the customers’ expectation of the reputation built over the years.

While outward appearances, ambience and service are important, a restaurant’s hygiene is crucial in determining how a place is perceived. Everyone prefers a clean, hygienic restaurant that serves delicious meals.

In early 2024, a video pertaining to Domino’s Japan gained traction online. The video showed an employee of Domino’s Japan picking his nose and wiping his finger on the pizza dough. Domino’s was once again quick to acknowledge this and apologise for the incident.

dominosjapan - Insurancepe Insights — A screengrab from the video

But you see, the damage to their reputation was already done. Social media users were quick to express their disappointment and calls to avoid the restaurant gathered steam.

These acts of carelessness might seem small, but they can have a seismic effect on a company’s business, especially involving tanking stock prices which can causes losses in millions!

Insuring reputation in Japan

In Japan, to help businesses manage this risk of damage to their reputations, a few insurance companies like Tokio Marine & Nichido Fire Insurance Co. offer Reputation Risk insurance or Reputation Expense insurance. It covers risks related to social media posts and products contaminated with foreign objects. The policy will even go so far as to assist the business with holding an apology press conference.

And business is booming for Tokio Marine, with a 20% jump in reputation expenses business in 2023 over 2022.

It is evident that with growing awareness of consumer rights, and the use of social media to spread awareness, companies are exposed to greater risks of economic damage than ever before.

While this specific case pertains to Japan, a society where respect and dignity are of greatest importance, there have been cases like this in India as well.

In 2014, an alert social media user was quick to spread the word with images of a pizza storage box on a Domino’s delivery bike being used to transport garbage bags. The word spread like fire and Domino’s immediately took action.

Again, in 2022, a photo allegedly clicked at a Domino’s outlet in Bengaluru showing cleaning mops and brushes hanging just above trays of pizza dough in the kitchen went viral on the internet. Domino’s said that the company has zero tolerance for violations of their operating standards and that the incident would be “thoroughly investigated”.