Reflecting on the Evolution of Retail Security

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EDITOR’S NOTE: Paul Jones, LPC, is the new director of asset protection and risk management at CKE Restaurants Holdings, Inc. The 25-year retail veteran started his career at Jordan Marsh and Mervyns before moving into management roles at Luxottica Retail, Sunglass Hut, and Limited Brands where he was senior vice president of LP and global security. Jones also led the loss prevention functions at the Retail Industry Leaders Association as well as at eBay. Most recently he was COO for Turning Point Justice before moving to CKE. Jones has long been active in the industry as an original member of the LP Magazine editorial board and founding member of the Loss Prevention Foundation.

EDITOR: You recently took a position with CKE Restaurants. Tell us who CKE is and what brands they represent.

JONES: 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 42 states and in 28 countries.

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EDITOR: Didn’t CKE start in Southern California?

JONES: That’s correct. CKE’s founder, Carl Karcher, began his entrepreneurial venture in Los Angeles in 1941 with hot dog stands and quickly grew the business. By 1945, the Karcher family had opened the first Carl’s Jr. restaurant in Anaheim. The restaurants steadily spread throughout the West Coast in the post-World War II growth of the American highway system. A couple of years ago, the company made a strategic decision to move the California corporate offices in Anaheim and Carpinteria along with the St. Louis, Missouri, office to Tennessee.

EDITOR: Carl’s Jr. is predominately still on the West Coast, correct?

JONES: In the United States, Hardee’s restaurants are predominately east of the Mississippi and Carl’s Jr. on the west, but the brand recognition for the Happy Star is nationwide. Both Carl’s Jr. and Hardee’s pride themselves on providing great customer service and innovative menu options while still maintaining their charbroiled burger roots.

EDITOR: You were most recently the COO of an LP industry solution provider. What enticed you to make the move back to the retail side with CKE?

JONES: Well, a couple things. First and foremost, my heart is in retail loss prevention and always has been. While I had great learnings as a solution provider and have newfound respect and admiration for those in the solution-provider space, I had a desire to get back into retail. As I worked with my network, the opportunity at CKE was presented to me as a group that was looking to change and transform their company. They were looking for a leader of asset protection and risk management that could help them with that transformation.

I had the pleasure of interviewing with our chief operating officer, Tom Brennan, and we really clicked. I was very excited about the type of change the whole executive leadership team at CKE envisioned. It reminded me of my early Sunglass Hut days when I was part of that company’s dramatic change. Today that company is still a vibrant, successful retailer as part of Luxottica Group. The CKE Leadership Team is committed to driving our global business forward, running a great QSR business, and having a global footprint to make this a very profitable company.

EDITOR: What areas of responsibility do you have?

JONES: Today I have asset protection, safety, and risk management. The QSR world is a little different from regular retail. Safety in our world is not only reviewing accidents to get to the root cause and figuring out solutions but also actually getting into the pipeline of how we build our restaurants, the type of equipment we use, developing new equipment when what’s out there isn’t working, and creating processes that will further enhance our safety culture.

Then we have a compliance function behind that, so as new products or solutions are introduced, we train and educate our employees to ensure they are working safely. In the QSR space, safety issues can be a bigger hit to the P&L than actual shrink loss.

EDITOR: Thus far, what have you found to be the major challenges and issues?

JONES: Currently, we have a unique challenge because we have an existing team running the business that’s in place in California that we’re replacing. So we almost have two jobs: one to develop a new team, new protocols, and new methods and procedures to attack losses and safety and risk, but at the same time managing the existing team. It’s pretty unique to some of the transformations that I’ve done in the past.

If you think about it, it takes a certain type of care and motivation for those associates who need to continue to drive the business forward while knowing that they are transitioning out of the company. But I’ve got to tell you, the team that we have in place in Anaheim has really stepped up to the challenge. They’ve been ultimate professionals in helping us build a new team in Franklin and making sure that they hold the business together with true integrity and honor in order to leave us with a better process and a better team.

EDITOR: Are you currently hiring your own team?

JONES: That’s my second-biggest focus. How do you hire a team of ten in a period of sixty days and get them trained within ninety days while not missing a beat with your current business? We’re in that process now of recruiting talent. Incidentally, I was able to find all our asset protection people using LPjobs.com.

It’s been really rewarding to take a new group of people—some with QSR experience, some with none—and onboard them very quickly knowing that we’re in this challenge learning the QSR space, because it is a different space.

EDITOR: Is your team going to be situated across the company in regional locations?

JONES: No, we went to a centralized model as I have done in past companies. When I started looking at the challenges and what the future looks like, it made sense to centralize the team and fly them out when we need them in the field. We’re moving to a telephone-interviewing model and high-prevention model—how we prevent incidents so that we’re not taking cases but really mining the data to go after only ones that are most meaningful. We’ve spent the last ninety days putting all the data sets together so that we fully understand all the drivers and triggers of profit loss, risk loss, and accident causes throughout the business.

EDITOR: Explain that a bit more.

JONES: We’ve done a ton of work to make sure that we understand the historical data to allow us to plan for the future. Part of the plan on the asset protection side is speaking to the field team in a way that they really understand what their losses are because today they don’t fully understand that. What we’ve done is come up with simple risk models—one, two, three, four, five—and input into risk models their food loss, accident cost, coupons, voids, and cash loss. What we see, as we all know the 80/20 rule, we can focus the field team on where we need better training, where we could maybe use more staffing, and where we could use investigations. In the past, they didn’t have the ability or the tools to be data-centric, whereas today we’re building those metrics so that we can move forward.

EDITOR: Talk about some of the technology solutions that you already have or that you plan to implement.

JONES: We’ve done just basic data mining using some internal tools, taking all the disparate databases in the company from audit scores to past cases to food loss to voids to chargebacks to turnover rates and building risk models with that. In the past, CKE looked at those things separately, but as we know as practitioners, we gain a lot more insights putting them together and looking at that total picture.

We found it necessary to break out Carl’s Jr. as a separate entity from Hardee’s when doing that type of data analysis because the shrink problems, food loss problems, safety problems are different in both locations. There are drivers, for instance, on food loss in a Hardee’s environment that’s being driven by certain products, mainly biscuits and the way we do buns. In the Carl’s Jr. environment, it’s not as centric for breakfast, so there’s less food loss as it relates to those items.

EDITOR: Risk management is not always an area most LP executives manage directly. How have you handled that responsibility?

JONES: One of the reasons this job was very appealing to me is I’ve never managed the risk management function. I’ve managed safety but not risk. So I was excited to be able to learn a new discipline. I had several industry friends help me prepare for that. Leo Anguiano spent several days with me talking about how to think about risk. Maurice Edwards spent time with me discussing risk and total cost of risk. I appreciate that people were very generous with their time.

Also, internally we recruited a solid risk management professional, and over the last four months I’ve spent a lot of time digging into understanding risk, the cost of risk, how to manage risk, how to do things maybe differently. We’ve found that we can use some technology solves into our risk pipeline to reduce costs. For one, we’re implementing a traveler care nurse line with Travelers Insurance. So instead of filling out forms and having an adjustor call our injured employees, crew members will be able to get on the phone with a nurse the minute an accident happens. Companies that use this approach find a reduction of 20 to 30 percent in their cost.

Calling other people in the QSR space, asking what they’re doing, and then looking at our approach and adjusting it, I’ve found to be pretty exciting because there’s some simple fixes that we’re doing that should save us hundreds of thousands of dollars.

EDITOR: Over the next twelve to eighteen months, how will you measure your success?

JONES: I think from the asset protection side, it will be, has this smaller team performed at the level of the past team or above? Have we reduced losses to the company? Have we been true business partners, and have we helped the field organization make their restaurants more profitable?

On the risk management side, it will be, what is the cost of risk and have we reduced it? A lot of that will be helped by our broker, Marsh, who has several QSR restaurants in their portfolio, who can help us answer, what is the total cost of an accident for worker’s comp and slips, trips, and falls? And are we at or above that? We’re starting to put quarterly measurements into place now to try to find that out because we haven’t done that historically here. Our quarterly metrics will tell us, for this same store subset, are we better or worse per total cost, per accidents per 100,000 employees, and how long has a claim stayed open? We are very aggressively working with our provider to go after the claims reviews and making decisions quickly on whether we settle or whether we move forward and litigate the claim.

Again, these are new learnings for me. I’ve got to say there are at least a half dozen QSR peers that have taken my calls and helped educate me on their programs. I’m taking the nuggets I get from each of them and working them into the program that we have.

EDITOR: Are more of the issues employee claims as opposed to customer claims?

JONES: The biggest loss issues in the QSR risk space are employee claims. Those accidents tend to be the more egregious accidents. But slips, trips, and falls in QSR can also be a nightmare. So we’re working on a lot of things. What are best methods for keeping floors clean and keeping them from being wet? Do we have the right mops in place? Do we have the right signage in place? Are we using the right utensils in the back? Are we cleaning our fryers the right way? Do we have the personal protection equipment on? Are people wearing the right shoes? All that is audited by a third party for us, and our safety manager follows up with stores with low scores to make sure they are retrained.

EDITOR: What role are you playing today with the franchisees?

JONES: Today we’re a support role only. When they call and need something, we help them. The goal is as soon as our program is fully up and running, we will look at an approach for supporting our franchisees to help them be the most profitable they can be. I envision determining what are the best methods and sharing what we do. We certainly don’t tell franchisees how to run their business, but we can give them our best practices.

Secondly, we have to establish a dialogue with the franchisees, which has not been part of our historic process. For example, I speak almost weekly with Tracey French at Boddie-Noell, one of our largest Hardee’s franchisees, to both learn what he’s dealing with and exchange different ideas that we’re considering. There are areas that we can collaborate and vendors that have more experience in the QSR environment.

For instance, both Boddie-Noell and CKE just put in Vector Security. To us it’s a great solution, it’s the right price, and they totally understand this type of business. We both separately, without actually knowing it, have implemented ThinkLP. For us, ThinkLP will be a loss prevention portal that will handle risk management, safety, asset protection, crisis management, and will help us follow up with the field compliance piece. It will handle accident reporting and risk management paperwork, and we’re considering setting up a module that will help handle HR and maybe even legal.

EDITOR: So over the next year or so, a whole lot of things will likely change in terms of your relations with the franchises.

JONES: That’s right. Again, my boss, the COO Tom Brennan, his sole goal is to ensure that his team, including us, are finding ways to help the restaurants and the franchisees be more profitable. So if I take that as my headline, I have got to build a path to help us get there. And again, it’s a different relationship because you can’t force your ideas on them, but you certainly can say, “Here’s what’s worked for us and for others, and here are solution providers that we can recommend and stand behind that you might want to think about.” We think there are a number of things that we can do to help franchisees around the globe be more profitable.

EDITOR: I’m confident you will make that happen, Paul. Let’s turn to some of your other unique roles in the industry. You had a great run with eBay. Tell us about that.

JONES: What a great experience eBay was for me. When I was leaving RILA (the Retail Industry Leaders Association) and looking to get back into the industry, eBay offered me the opportunity to talk to them. I was a little suspicious because I knew that their site had stolen goods and believed at that time that they seemed to be resistant to taking care of that. But as I talked to them and met with individuals there, it became clear to me that the entire eBay retail problem centered around a lack of trust and communication. I looked the folks at eBay in the eyes and believed that they really, truly wanted to fix the problem. So I joined knowing that there was nowhere to go but up with the relationship. I started with just one focus-to try to bring eBay and retailers together. So in a quick period of time, I was able to show key people in eBay that there were stolen goods on the site and that we could use data to try to pinpoint that.

EDITOR: How did you do that?

JONES: One of my first hires was a programmer. I asked him to get me all the pawnshops on eBay who were selling baby formula, Crest Whitestrips, and diabetic test strips. There were hundreds of them on eBay. And from that point on we were able to drill into it to find out that they didn’t have a clear supply chain, that they were actually buying product from people committing crimes, and we were starting to address some of those sellers on our site. That gained instant credibility with the senior team at eBay, and I became very trustful that eBay wanted to fix those problems.

As I went around the world getting onboarded with eBay, I found out that we had something like sixty people who manually processed subpoenas. It seemed very odd to me that we were doing this manually through faxes given eBay was one of the largest technology companies in the world. So we came up with an approach to automate the process, so law enforcement would go through the web to give us their subpoenas. We would pull the data automatically. We built a system that does this, which works very well today in multiple languages.

We took the payroll that we saved from that and hired asset protection managers. We started looking at not only stolen goods but also counterfeiting, exploitation of children, and money laundering on the PayPal side. We built reporting and mechanisms to not only identify those crimes but also actually go after some of those criminals. From forgeries in art and autographs to clearly stolen goods to someone scamming the system by buying stuff but not paying for it, we had different approaches across the globe for all of that.

We made a real dent in crime, and within a couple years, as you guys highlighted in the magazine, instead of pointing fingers, retailers and eBay were working together to solve the problems as a joint collaborative team. I’m hearing that they’re still doing great things with the retailers, which is really good.

EDITOR: After eBay, you moved to the solution-provider world as COO of Turning Point Justice. What did you learn from that experience?

JONES: At eBay, I had spent 80 percent of my time on the road. Moving to the solution-provider side was a big risk for me, but one of the real positives was it allowed me to work within two miles of where I lived. I had met Lohra Miller, the former district attorney of Salt Lake City, who talked to me about her technology project and her vision for helping the criminal justice world with petty crimes by educating offenders as opposed to having them arrested. It’s something I have always believed in. She advised me that she was a partner with the National Association for Shoplift Prevention (NASP), who I had been associated with for twenty years. Frank Johns and I rolled out one of the first retail pilots of NASP’s offender education program in Los Angeles twenty years ago. Given this technology startup was paired with a very reputable group of people that I knew were passionate about fixing shoplifting and helping retailers, I thought Turning Point Justice (TPJ) was a good fit for me.

When I say that TPJ was a true startup, I really mean that. For the first six months we had a small office with plastic tables, using our own cellphones, and holding meetings in hotel lobbies to try to get sales and make things happen. I worked hard to get some key retailers to give us a chance and build our sales, and we did quite well with that. We were able to put operating disciplines in place to make sure we had good purchasing, that we had the right product. We were able to always continually adjust our technology product to make sure that we were in line with both legal and statutory requirements, whether it be district, state, or county.

I really enjoyed the entrepreneurship. As you know, one day you’re doing HR work, the next day you’re recruiting, the next day you’re packing boxes and shipping stuff, or you’re on the phone with your retail counterpart. Some days that’s good, and some days you’re scratching your head saying, “What did I accomplish today?” as you’re driving to the mailbox to drop off shipments. It was a great experience for me to help build that company and put an infrastructure in place.

EDITOR: You’ve also had one other very important industry involvement as one of the founding members of the Loss Prevention Foundation and are currently on its board of directors and executive committee. Why have you remained so actively involved in the Foundation?

JONES: I remember sitting in a room talking about why our industry didn’t have an organization that was committed to developing the professionalism of the loss prevention industry. We all knew that there were many great leaders of loss prevention that you could put against any senior operator, and they could run the business as well as the next person. But how do we make sure that we didn’t lose the new generation of LP people coming in? I think that concern really inspired me to be part of the LP Foundation, to help be a beacon out there for loss prevention people coming in.

I get a real kick out of going on LinkedIn and seeing these new loss prevention professionals so proud that they passed the LPC. And I just am proud to see that so many of these people that have gone through LPQ and LPC have gone on to be leaders in our business. I can testify that certification is not just something where you sign your name, pay the money, and get credentials. It’s a course that truly puts a framework around what it is that we should do as practitioners.

I’m also proud that we have stayed on course and never strayed from our mission. It isn’t about making money or prestige. It’s about taking care of this profession and making sure that it continually grows, that it’s professional, and that it’s taking on new challenges. I know we have a number of new offerings coming out from the foundation, and I’m very excited about them.

EDITOR: You deserve a lot of credit for where the foundation has grown today. If you could, reflect back on the last twenty years of what you’ve seen in the loss prevention industry and give us your thoughts on where we have been, where we are, and where we are going.

JONES: 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.

I really can’t think of another industry with professionals who add value and impact their company as much-an industry where a high percentage of people are willing to take phone calls, share a program, and give you their advice. That, to me, has made this a phenomenal industry to be part of.

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