Crisis Management and the Wendy’s 99 Cents Chili Incident

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While this nationally recognized crisis management incident took place in 2005, the lessons learned from this incident are timeless; providing both critical and relevant advice for crisis management teams across the retail industry.

With millions of customers visiting restaurants and other retail establishments daily, the potential for a crisis management concern is almost always present. A typical crisis management issue is often caused by a human accident or an act of nature. Less often, companies can be victims of workplace violence. And unfortunately, companies also can be victims of fraud.

Such was the case in March of 2005 when police were called to a San Jose, California, Wendy’s restaurant to investigate a woman’s allegation that she had found a partial human finger in a bowl of chili.

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Over the next days and weeks, a hoax perpetrated against Wendy’s International Inc. became national news, coffee-break conversation, and fodder for late-night comedians. However, the snowball effect of the crisis management issue was no laughing matter for Wendy’s, ultimately resulting in substantial losses for the company and its franchisees.

The potential effect of any crisis management issue can be devastating in terms of employee and customer safety, brand integrity, and financial earnings. Thus, it behooves corporations to be diligent in crisis management preparation in order to minimize potential losses and facilitate normal business operations as quickly as possible.

Below is a chronological summary of the incident and the company’s action steps and responses as well as a number of key learnings that will benefit loss prevention and crisis management professionals who may face crisis events in the future.

Action Steps

DAY 1—The initial incident occurs at 7:20 p.m., March 22, 2005. The store immediately stops selling chili. While they save the finger, they discard the remaining chili.

Local police respond to a call from the store, but regard the incident as a health issue, not a police matter. Friends of the claimant are seen taking photos outside the restaurant. By 10:00 p.m. that evening, the story hits the local news as a minor, unconfirmed story.

At the same time, the franchise team that manages the San Jose restaurant contacts Wendy’s corporate communications department. The team immediately begins preparing media statements in anticipation of the potential national media story.

DAY 2—By 10:00 a.m. the next day, the franchise owner and operations team are on-site to begin their investigation and assist the county health department’s inspection of the store. The initial investigation confirms that chili preparation procedures were documented and followed as prescribed. All employees’ hands are examined and found intact.

Later that afternoon Santa Clara County Health Officer Dr. Martin Fenstersheib publicly confirms that the finger is human tissue. In response to questions from the media who inaccurately assume the finger had been cooked, Dr. Fenstersheib states that the potential health risk to anyone who might have eaten the supposedly contaminated chili was minimal, but leaves the door open to the possibility.

DAY 3—The next morning a photograph of the finger is released to the media by the county health department. The photograph along with statements by department spokespeople who characterize the “victim” as distraught and sickened by the incident fuel the rapidly growing media frenzy and contributes to reporting that is sympathetic to the as-yet unnamed woman.

By this point Wendy’s corporate crisis management team meets to devise and review the response strategy. The team decides to state that the company is fully cooperating with the health department investigation. At the same time, multiple departments are fully engaged in gathering information related to the incident.

The corporate security department is in contact with San Jose police department detectives and hires a local private investigator to provide assistance. The security department’s due diligence uncovers evidence that the woman had previously made claims against corporations in her home state of Nevada.

Wendy’s quality assurance department traces back the chili ingredients to seven different suppliers, all of whom provide documentation that no recent employee accidents occurred that involved a severed finger. This information is provided to the local police.

DAY 7—After a week of intense media coverage that has resulted in plummeting sales at Wendy’s—especially on the West Coast—the claimant, Anna Ayala, goes public with her lawyer in an interview on Good Morning America. Told about the appearance only the day before, Wendy’s declines to appear on the show.

DAY 8—With Ayala preparing a law suit against Wendy’s and copycat incidents on the rise, follow up meetings with San Jose police convince detectives that the finger did not come from an internal source, which causes them to officially launch a criminal investigation.

At the same time, the Wendy’s crisis management team arrives in San Jose with a forensic expert hired by the company. Because the local medical examiner’s office has no experience with body parts found in food items, Dr. Lynn Bates provides direction for testing to discover whether or not the finger was cooked with the chili ingredients.

DAY 9—To assist the police investigation, Wendy’s sets up a toll-free telephone line and announces a $50,000 reward for information leading to the source of the finger. Within six days, nearly 300 calls are received, including one caller who overheard Ayala talking about the finger. A second caller gives specific information about how Ayala and her husband had scammed the caller over the sale of a trailer.

DAY 10—With losses increasing daily, Wendy’s executive team and franchisees become increasingly impatient and frustrated with the speed of the police investigation. At the same time, the Las Vegas police department joins the investigation based on the information received from the 1-800 line.

DAY 17—Police search both Ayala’s house as well as her father’s house in Las Vegas. Mexican law enforcement is asked to assist with surveillance and gathering information based on a rumor that the finger was brought in from Mexico after an accident with a ranch hand.

DAY 22—With the media attention now intensely focused on Ayala, she announces that she will drop her claim citing the stress and misery of being in the public spotlight.

DAY 24—While circumstantial evidence is building on Ayala, determining the source of the finger is considered crucial. Further forensic testing of the finger is required.

Also to help with the discovery of the source of the finger, Wendy’s increases the reward for information to $100,000. At the same time, to help get customers back into their stores, Wendy’s announces a “Free Frosty Weekend” promotion.

The company states that their employees had passed polygraph tests proving that they were not the source of the finger.

DAY 32—Anna Ayala is arrested on fraud charges related to the trailer fraud communicated on the 1-800 line. Her husband, James Placencia, is also arrested on failure to pay child support in the amount of over $400,000.

Still hoping to find the source of the finger, police remind the public that the $100,000 reward is still available, which ultimately results in a lead that pans out.

DAY 53—After following up on the 1-800 line lead, police announce that they have used DNA testing to positively identify the owner of the missing finger as a coworker of Ayala’s husband who had lost it in an accident and sold it to him for $100 to repay a loan.

Based on the new evidence, Ayala and her husband are charged in the Wendy’s case with attempted grand theft.

Eight months later on January 18, 2006, Ayala pleads guilty and is sentenced to nine years in prison. Her husband is sentenced to twelve years.

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Crisis Management Learnings

The chili incident at Wendy’s is a compelling case study and provides a number of key learnings for loss prevention and crisis management professionals.

  • The first 24 hours are critical because the early stages of a crisis shape the proper response. As such, crisis plans should include an early warning system that alerts the entire crisis management team within minutes, if possible, of an incident. This will allow seasoned crisis team members to be on the scene within those critical first 24 hours.
  • Do not assume that a crisis can be contained locally. Given today’s technology and rapid communications, assume that word and pictures of an incident may be available worldwide within hours. The crisis team response should be set in motion as quickly as possible before media coverage picks up.
  • Try to maintain all items that could help resolve the case. In Wendy’s case, the employees discarded some of the chili involved. Make sure employees at all levels are aware of what to do when an incident occurs. If the incident involves food contamination like this one, detail specific procedures and communicate those procedures to the employees involved during the first few hours.
  • Company and franchise employees should know to immediately involve the corporation on any incident rather than attempt to handle it by themselves.
  • Contact all relevant local, state, and federal agencies immediately to let them know you want to cooperate and find out the truth. Offer any assistance necessary to aid in their response or investigation. Be sure to get key names and contact information for communicating with the proper person at each agency.
  • Understand the proper chain of command when dealing with local authorities. In this case, four different local agencies were involved: the San Jose city police department and the Santa Clara county sheriff’s department, health department, and medical examiner’s office.
  • Make sure you hire the right resources to help you in a crisis. If possible keep an investigative or crisis response group on retainer for crisis management events or at least maintain an up-to-date list of resources that you know are reliable and available when needed.
  • Be aggressive in your information gathering. It is critical to stay abreast of anything and everything happening that is related to the event.
  • Resist the pressure to release information or make a statement until you are sure of the facts. Understand that whatever statement or information released will impact your brand, especially if the information later proves false or incomplete.
  • The crisis team should meet daily (or more often if needed) to review the facts as they are known that day. This can be somewhat painful if no new information is available, but constant team communication is critical.
  • Make all decisions based on integrity and core values. In this case, Wendy’s followed founder Dave Thomas’ philosophy: “Do the right thing.” At all times act the way you want to be remembered, because you will be.
  • Do not provide senior management or stakeholders with a resolution timeline unless you can be absolutely sure you can achieve it. Committing to a resolution and then missing it will only undermine the crisis management team and further frustrate management.
  • Prioritize and follow up on all leads. In Wendy’s case, there were a number of calls from people who had lost fingers from accidents, including a number of exotic animal owners. While most of the leads will likely not amount to anything useful, you won’t know until you investigate. Don’t let disappointment take you off focus.
  • Be prepared to deal with an onslaught of claims that may overwhelm you. Calls should be answered 24 hours a day, 7 days a week.
  • Prepare and communicate updates internally to employees and franchisees often and consistently. Even if you have little new to report, let everyone concerned know so that people are not left guessing. You cannot over-communicate internally.
  • Coordinate as closely as possible with law enforcement and other agencies involved, especially when it comes to public statements. This will help you avoid misstatements as well as  misunderstandings that could jeopardize your working relationship.
  • Review and update your crisis management plan regularly, at least once a year. All team members should understand their role thoroughly, especially the communications procedures.
  • Be aggressive in your response. Don’t sit back for things to happen. If the police department or other agencies are not investigating aggressively, consider using your own or hiring private investigators. Third-party investigators can help defray insinuations that the police are working too closely with the corporation.
  • Consider using a reward for information to expedite the resolution. However, be sure to coordinate this with all agencies to make sure everyone is in agreement that an offer of a reward is appropriate.
  • Use quick “trace back” analysis. In Wendy’s case, the quality assurance team was quickly able to eliminate the probability that the finger came from an internal source.
  • Coordinate third-party specimen analysis with local authorities. Many authorities may be unfamiliar with handling and testing specific types of evidence, which was the case in this incident.
  • Generating publicity in key markets surrounding the investigation can help stimulate leads. Talk to local media to keep the story alive and focused on the truth.
  • Work to resolve the crisis as quickly as possible in order to help your business recover as quickly as possible. A smaller company may have gone out of business. Remember that a crisis management issue can hurt not only the employees affected locally, but also the shareholders and other stakeholders of the company

 

This article was first published in 2008 and updated in January 2016.

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