Learnings in the Quick-Service Restaurant Segment

Interviews with executives from CKE Restaurant Holdings, Dunkin’ Donuts, McDonald’s, Papa John’s Pizza, and Wendy’s

Over the years, LP Magazine has interviewed a number of executives in the casual and quick-service restaurant industry as well as published contributed articles from practitioners in that segment. In conjunction with the 40th annual conference of the Restaurant Loss Prevention & Security Association (RLPSA) August 4–7 in Nashville, we look back at some of the past articles and provide excerpts here. The full articles can be accessed by the links below.

McDonald’s USA
Rob Holm, Senior Director of Safety and Security for US Operations

Excerpts from “From Corporate Security to Restaurant Loss Prevention and Safety” July–August 2016

“We have approximately 36,000 restaurants worldwide and serve more than 67 million people a day. Within the United States, we have approximately 14,000 restaurants serving more than 25 million people a day….”

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“We believe that our company-owned restaurants serve a valuable purpose, and it’s really about the people. We put people through our restaurants. We train them. We develop them. We want them to mature. We want them to grow. We want them to be successful. In fact, about half our leadership came from restaurants, so we embrace that.

“Also, when we want to test and try something new, whatever that might be—a menu item, a piece of equipment, a design in a restaurant—our company-owned restaurants provide a good location….”

“Serving and supporting the company-owned and franchise-owned restaurants are both very important. Almost my entire team is located in the field, which provides them a very good opportunity to understand the local business needs and issues. By aligning our objectives with regional leadership’s goals helps guide us on our priorities….”

“Having a lean organization is a matter of perspective. I have a different point of view. It is not the size of my organization I focus on, it’s really about the value my organization brings to the company and to our stakeholders. McDonald’s is not in the security business, we’re in the hamburger business. Therefore, we need to be good students of the business and be seen as true business professionals first, subject-matter experts second. If we apply this approach, it shouldn’t matter the number of restaurants. It’s really about being smart and leveraging your resources that achieve the best results….”

“For any issue, we have a two-pronged approach—proactive and reactive. From a proactive standpoint, it’s all about education, training, and awareness. Sustaining the security and protection of our employees and customers is the number one goal, so we focus on educating our managers on safety practices, crime prevention, and food and inventory standards. We want our training programs to be there to minimize any issues we can before they happen.

“Then the other prong is reacting to situations that may arise, whether a crime, accident, or a situation that could impact our customers. We get a lot of attention. It’s one of the wonderful things that come with being one of the most recognized brands in the world. But a lot of the focus on us is just a simple result of being deep in the community.”

Dunkin’ Brands
David Johnston, Senior Director of Loss Prevention and Corporate Security

Excerpts from “From Retail LP to Solution Provider to Restaurant Brand Protection” July–August 2017

“Dunkin’ Brands is the worldwide franchisor of two of the world’s most-recognized and beloved brands—Dunkin’ Donuts, which started in 1950 in Quincy, Massachusetts, and Baskin Robbins, which started in 1945 in Glendale, California. What I like best about our brands is that although they began on opposite coasts, everyone is passionate about our brands and they evoke powerful memories. Everyone has a story about the first time they enjoyed Dunkin’ donuts or Baskin Robbins ice cream. It makes working for our brands fun.

“Today there are more than 20,000 Dunkin’ Donuts and Baskin Robbins locations across more than sixty countries. We’re 100 percent franchised in the United States; we have no company-owned locations. We are also unlike many other franchised companies in that we don’t own our supply chain….”

“As a franchisor, we do not direct, develop specific programs, or require certain measures of our franchisees. We recommend practices and common elements of an LP program, but specifically developing a program is up to each independent franchisee. That doesn’t mean the LP team doesn’t engage with our franchisees, because we certainly do. We just engage more from a consultative and business approach.

“Our core initiatives are focused on educating the independent franchise business owners on the importance of incorporating the concepts of loss prevention into their business. We educate them on understanding how losses affect sales, unit economics, and overall profitability. We show them systems, reports, and metrics that we think can help them better understand their business, and they then are positioned to take their own actions to reduce loss….”

“Our team is fully engaged in various aspects of our business, which is a testament to the people on the team and our ability to build relationships with other departments.

“The LP team focuses their time on our franchisee initiatives, understanding that the more profitable our franchisees are, the better it is for us as the franchisor. We also are responsible for investigating certain violations of our franchise agreements, including intentional underreporting of sales. We look for loss prevention managers who are business savvy, can understand financial documents, and can lead a sophisticated investigation. The team also has a role in investigating potential fraud regarding our e-commerce.

“On the corporate security side, our biggest responsibility is Dunkin’ Brands’ roughly 1,100 employees; especially the safety and security of all employees while traveling to any of our locations across sixty plus countries around the globe. Whether it is a member of leadership traveling to an area or an international business manager in-country, our employees are our brand, and we want to keep them safe.”

CKE Restaurants Holdings
Paul Jones, LPC, Director of Asset Protection and Risk Management

Excerpts from “Reflecting on the Evolution of Retail Security” July–August 2018

“CKE Restaurants Holdings, Inc. owns two brands in the quick-service restaurant (QSR) industry, Carl’s Jr. and Hardee’s. We are headquartered in Franklin, Tennessee, just outside Nashville with more than 3,900 restaurant locations in forty-two states and in twenty-eight countries….”

“I can say ten to fifteen years ago, we were all about driving numbers, hoping shrink would come along with it. Sometimes we had data, but most often we were going on instinct. As technology evolved and we had exception reporting, we learned how to use data to start driving decisions. In fact, what I saw in my career is that we in loss prevention did it better than the operators. We took the time to make sure that data drove decisions, and then we developed the solutions around what the data told us. We developed programs, built training, and awareness behind that, and then we saw our shrink get fixed.

“When you take that approach to allow data to drive the decisions, and you make the investment in getting the right people who are very smart, you’ll have a great solution. I hope to get people sitting around me that are smarter than I am and very diverse in their thinking. I’ve seen a number of times in our industry where retailers make an easy decision to put an operator to run a loss prevention organization. More often than not, it hasn’t worked out so well. It reminds me that an LP executive brings a unique discipline to the table with the understanding of how to put together what the data tells you with how to build a program and pull the levers to make sure that you are driving your shrink down, at the same time impacting your sales in a positive way and keeping people safe.

“Loss prevention professionals really are great leaders who add more and more value to their companies. If you look back to the aftermath of 9/11, most of us took on crisis management roles. As the world changed, we had to learn what to do about workplace violence and organized retail crime. Now we’re managing programs for active shooter. Some are starting to take on data-security roles and looking at cyber crime. And now risk management.

“Today as we move to a total cost of loss strategy, I think it helps us build a better return on investment. I believe most LP practitioners have always taken into consideration what the total cost of loss is, but now there is framing around it that creates a more powerful message to speak to the corporate business leaders.”

CKE Restaurants Holdings
Anne Sullivan, Vice President of Asset Protection and Safety

Excerpts from “Operational Standards Support” July–August 2015

“Probably the biggest differences between traditional retail and quick-service restaurant are how loss is audited and controlled and how the company views the return on investment for loss prevention. In the retail world you have quarterly, twice-yearly, or yearly inventories. You get hard numbers back, and you are held accountable to that. But when I switched over to QSR, there wasn’t a true metric or standard in place that I could see to really know what the starting point of loss was and what the tier percentage of loss was….”

“The other difference was since I came from mall-based retail, I didn’t really have much exposure to robberies. I believe I only had four in my career prior to CKE. Now, with QSR it is a big focus based on the fact that the stores are open 24/7, there is easy freeway access, as well as other factors. The safety issues in QSR are far different than in retail, because we deal every day with being open 24 hours a day and the activity that attracts. There are just so many opportunities that the QSR industry is vulnerable to….”

“When you review the video after a robbery, probably 70 percent of robberies are triggered by opportunity. The robber comes in, they take a look around and assess the opportunity, they look in the cash drawer when it’s opened, and then they rob the store. So taking away as many opportunities as possible is key.

“We train our employees to control the cash levels in drawers. We have to be careful about how we transfer our money. We implemented smart safes, which absolutely had a significant impact on robberies and cash control. Another big thing that we implemented is eliminating back-door openings during night time hours. We took our back-door alarms and set them to activate silent alarms between dusk and dawn, so if the back door is opened at night, my security center gets an alarm. They can check to see why it was opened, and we can then coach in the moment. The store will be called immediately and told to shut the back door. An email will go out to leadership noting the violation. Since we implemented this last year, we only had one back-door robbery, which was a significant decrease. We have also decreased our internal involvement robberies, and we created a safer environment for our employees by training and holding them to a standard.

“One other thing we focus on in the field is not only delivering training and prevention, but also training them on how to handle a situation if it occurs. We never want them to engage the robber. We want them to give the robber the money. We want to ensure that people don’t get hurt, but we also want to ensure that we’re there for our employees if it does happen.”

Papa John’s International
David Rydeen, National Director of Safety and Security

Excerpts from “Better Security. Better Safety. Papa John’s.” July–August 2007

“We deliver pizzas, so one of the most common incidents we deal with is automobile accidents. We are also a cash business, so the next biggest issue is delivery-driver robberies. When we have an incident, part of my job is to question what we could have done differently to prevent that incident from occurring….”

“Our franchisees are organizations that have their own resources. I don’t typically get involved in investigations on the franchise side. What I do is present them with information about how we do it or provide them with solutions that we have used or vendors that we have used in the past. It’s up to them to decide whether or not to use our suggestions or whether they go out on their own and seek their own vendors or solutions.

“Over time we have developed a standard security package, including clear policies, that we ‘install’ in every restaurant. A local owner would, therefore, know what type of approach to take for a specific issue at a specific site. It might involve doing more or less, depending on the situation. I spend a lot of time developing those system guidelines….”

“There are a lot of ways to measure performance in a restaurant—customer service, customer complaints, sales, profitability, et cetera. We have a database covering all of our stores that tracks their effectiveness. We’ve also added audit functionality that allows us to look at orders coming in and going out and to spot abnormalities, such as deep discounts, overrides, and zeroed outs. So, we look at the best-to-the-worst restaurants in terms of specific measurements.

“Then there are store visits. As you park your car in a restaurant parking lot and walk toward the restaurant, you learn a lot about that restaurant because you can see if the parking lot is clean, if the window ledges are clean, if the doors are clean. You know if someone takes pride in what they do and whether they’re running a business or just collecting a paycheck….”

“We have a restaurant disaster recovery plan that’s specific to each restaurant in each region. We also work closely with our public relations department to set up communication processes for our franchisees. We learned a lot from Hurricane Katrina. We purchased satellite telephones so we now have the capability to communicate if we have another disaster. I also manage the corporate-wide disaster recovery program for our headquarters operations at the corporate campus.

“The key to disaster recovery and crisis management is having a plan, working the plan, and communicate, communicate, communicate. After Katrina, we were literally doing conference calls every 24 hours. Sometimes, we did not have much new information to communicate, but the point was that we were communicating every 24 hours.”

Wendy’s International
Chris Manning, Director of Loss Prevention and National Security

Excerpts from “The 99 Cents Chili Crisis” January–February 2008

With millions of customers visiting restaurants and other retail establishments daily, the potential for a crisis is almost always present. A typical crisis is 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.

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

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

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 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 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 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 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 recovery your business as quickly as possible. A smaller company may have gone out of business. Remember that a crisis can hurt not only the employees affected locally, but also the shareholders and other stakeholders of the company.

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