If there is one thing that shareholders hate more than bad publicity, it’s a bad quarterly statement. In the recent case of a national restaurant brand, we saw more than one hundred people infected with a pathogenic strain of E. Coli. As business leaders, we are obligated to address such critical issues before they impact our corporate brands and ultimately shareholder value. It is much more complicated to fix problems once they happen than it is to invest in making sure they don’t happen.
Negative Publicity and Dropping Stock Price
In this particular case, the national chain has seen a 30% decline in stock price in just two months.
Adverse publicity and the risk of a bad quarterly statement is clear and present for this national chain in question. When negative publicly surrounding situations such as an E. Coli outbreak, it usually results in a domino effect. Customers will abandon your restaurants, some shareholders will sell off their stock immediately, and others will hold and see how the executive team handles the situation. In this particular case, the national chain has seen a 30% decline in stock price in just two months. While I’m sure this brand can recover, they will not do so without a black eye for the brand and a considerable lower shareholder value.
Potential investors look for companies that have strong brands and where their stock shows promise. With people in nine states contracting E. coli after eating at this chain, and another 140 in Boston, mostly college students, contracting a different disease — norovirus — after eating at the same chain. It isn’t just one bad press story that will hurt your stock price and sales, it’s when companies have multiple situations of food safety over a short period. All of this is preventable and even in the situations where it may not have been preventable, having the proper audit trail and supplier list allows your team to respond quickly and remove the contaminated product from your stores before it becomes a larger problem.
Increase Value to Both Customers and Shareholders
When a situation like an E. coli breakout happens, many organizations will just put a Band-Aid on their issues versus implementing fundamental changes to their standards and processes. Organizations have to look at efficient methods of rebuilding their food safety standards and protocols, not just to throw people at them. If your existing processes are manual with little accountability and reporting, adding more steps to an already complex process will not reduce the risk of future incidents.
Responsibility for good health and safety practices begins with the leadership team and proceeds throughout every level of management and staff. Having the right tools to support your management team and staff is equally critical to the success of your overall program. The goal of your program should always be to prevent foodborne illness or injury. However, you cannot overlook the executive-level goals of maintaining a strong corporate brand as well as ensuring that shareholder value remains stable. The only way that this can be accomplished is having the right level of reporting from the bottom up, and it has to readily available.
Incidents go beyond impacting customer safety; the domino effect will impact suppliers, employees, sales, profits, stock price and eventually shareholder value. As leaders, we have the ultimate responsibility to protect every aspect of our businesses and continued work to find ways to improve and provide better visibility across the entire organization.
Reducing Risk of Audit Flaws
In many situations where there has been negative food or other health safety conditions, the FDA had found that auditors reported the food operations had high conformance rates (95+%) with standards in the Superior levels. Let’s look at that sentence again, a company had a foodborne illness outbreak, yet their last audit indicated they had a high conformance rate, and the auditor gave the restaurant a Superior quality level. Many existing audit methods and reporting tools lean heavily on the manual side, which increases the risk of error. Humans make mistakes during the audit process; they are human after all. Furthermore, mistakes are made during the analysis process as many of the tools and applications being used by auditors are also error-prone and time-consuming. Having the best people and systems in place to prevent such incidents is important. Reducing the risk of incidents starts with having the proper standards and guidelines in place and the ability to compare the results of your inspections and audits against your standards quickly and accurately.
Executive teams should have access to audit and inspection results at their fingertips and sufficient reporting in place that they are able to quickly look up items, such as the top 10 issues the company has had across every single restaurant location in the last six months. Having this type of “snapshot” data at your fingertips quickly allows you and your teams to respond to known issues and prevent future issues from surfacing.
Consistency is Valuable to Shareholder Value
Consistency is king in the food service industry, as well as food hygiene and safety. A few years back in 2013, TGI Friday’s reported that it received a five out of five in the United Kingdom for having the highest food safety rating of all of its 60 stores. According to their management team, the company invested a seven-figure sum to achieve the five-star rating.
When shareholders hear news like this and the fact that the company invested more than a million dollars in ensuring that it met the government’s food safety standards, this is money to their ears. Like customers, shareholders love consistency in standards, processes and revenue growth. The first two certainly have an impact on the third. Tracking quality and safety with your suppliers, distributors, processing, food preparation – all the way through to the customer’s table – helps keep business on target and also assigns proper accountability.
Properly managing food safety auditing and inspections should be considered equally important to your business as your product quality and delivery are. It’s time for you to rethink your quality assurance processes, and evaluate tools that ensure those processes are error-free. RizePoint Enterprise Compliance Management software is purpose-built to proactively safeguard both food service compliance performance as well as shareholders. Learn more at RizePoint.com