Food Safety: Damage Control

Pat & Oscar’s wins back customers after E. coli outbreak.

By Christine Zimmerman, Contributing Editor -- Chain Leader, 3/1/2004

Local television reporters from every station eating your food on the air. Customers waiting for hours around the block to get into your dining rooms. Feeding 50,000 happy guests in three days. Sounds like a dream come true, right? For Pat & Oscar’s these positive results stemmed from a food-safety nightmare.

Managing crisis: (from l.) Director of Training Melissa Master-Holder, San Diego Market Partner George Hunter, Vice President of Marketing Jeanette Thebeau and Food and Beverage Manager David Hill.

Last September, at least 41 people reportedly became ill after eating at the casual-dining chain’s San Diego County and Orange County units. The source of the contamination was E. coli-tainted lettuce. The product, which they received from a distributor, was already washed, cut and packaged. Although the chain did lose money from the outbreak, it did not lose customer goodwill. Crisis-management experts credit the chain and parent company, Worldwide Restaurant Concepts Inc., for taking fast action to manage the crisis and get customers back in the restaurants.

“We just knew that the health of our consumers and employees was our first priority. We were much less concerned with putting the right spin on things,” says David Hill, food and beverage manager at the chain.

Proceeding with Care
In the early days of the 10-day food-safety crisis, Pat & Oscar’s received a great deal of negative publicity, according to Hill. “One day we were the lead news story, beating out [California’s gubernatorial] recall election,” Hill says. “But it was imperative to have the facts and take action before we could defend ourselves.”

Crisis management is not so much saying the right thing but doing the right thing and communicating that message, says Steven Fink, president of Lexicon Communications Corp. “The best thing Pat & Oscar’s did was to understand in the first couple hours of their crisis that the company was in unchartered territory. They knew they weren’t capable of managing a crisis of that proportion,” he adds. Realizing they needed help from an experienced, neutral party, Pat & Oscar’s executives hired Lexicon.

Lexicon advised Jack in the Box after its E. coli outbreak a decade ago. The firm also counseled the state of Pennsylvania during the Three-Mile Island nuclear accident and the then-Soviet Union after the nuclear disaster at Chernobyl.

“It’s amazing that companies will hire the very best lawyers and accountants in the world for their specialties, yet think they can handle a crisis on their own,” says Fink.

The other big mistake is heading to the Yellow Pages and picking any public-relations firm. “PR is crisis communications, not crisis management. It doesn’t solve anything,” Fink claims.

Hiring more lawyers can be another misstep. “You can’t let lawyers run the show during a crisis. Most lawyers just want to avoid litigation and win cases. So they advise companies to say, ‘No comment,’ to everything. That’s the biggest mistake. Companies need to get out there and protect their reputations,” Fink says.

Step by Step
Fink says the best way for restaurants to be prepared for crisis is to have third-party trainers come in while everything is running smoothly and go through mock situations, so everyone knows how to handle a crisis when it does hit.

Pat & Oscar’s staff didn’t have crisis-management training before the E. coli outbreak. But the company’s first step was to e-mail and call every general manager in each of its 20 units in Southern California and its one unit in Phoenix. It instructed them to immediately discard all produce and any other suspicious food that the state deemed could be contaminated.

“We called general managers at home. Whatever it took,” explains Jeanette Thebeau, vice president of marketing at Pat & Oscar’s.

Within three days of customers reporting illnesses, state and federal agencies narrowed the search to the chain’s lettuce. Pat & Oscar’s coordinated its own private investigation with state and county health officials. The chain quickly fired the distributor of the lettuce—also a source of contaminated lettuce at two local school districts—and found a replacement. Pat & Oscar’s is also working to make the distributor accountable for the contamination. “Our manufacturer and distributor are insured, and in order to recover our losses, we have filed against them per our legal counsel,” says Thebeau.

“We were cautious about making a public statement until we had all the facts,” she adds. “The crisis-management firm was instrumental in our pacing.”

Within eight to 10 days, Pat & Oscar’s made a public statement, letting customers know of its concern. The chain apologized and mentioned that the distributor’s lettuce was linked to the school illnesses to distance the outbreak from the restaurant.

Fink says contamination in restaurant chains stem from one of two sources: employees’ improper handling of food or an outside agent.

“We invited camera crews into the heart of our house to show them we had nothing to hide,” says Thebeau. Pat & Oscar’s sent food to news crews and ran a full-page ad in the local San Diego newspaper offering three days of free pizza, salad and its signature breadsticks in 10 units. While customers waited in line for hours for their free meals, clowns and jugglers entertained them as they noshed on breadsticks.

“We wanted to thank San Diego for its support,” Thebeau explains.

The chain also published an 800 number offering customers the opportunity to call in their medical claims, which Pat & Oscar’s paid in full.

Dr. George Belch, chair of the marketing department at San Diego State University, observed the situation at Pat & Oscar’s and discussed it with his students.

“I think the chain handled the crisis well for the most part,” Belch says. “Offering the meals was a smart move. Companies can take out ads, trying to guarantee that they’ve taken the needed measures, but ultimately, they have to get people back into the stores.”

People infer attitudes from behavior, according to Belch. So if people found themselves at Pat & Oscar’s for the free food, they realized that they must have thought the food was safe.

“Now were those true customers or freeloaders? It doesn’t matter, because those restaurants were full. And they had been completely empty after the news hit,” says Belch.

The First Crusade
In the wake of the E. coli incident, Pat & Oscar’s has become a crusader for better food safety recommendations regarding packaged lettuce.

“One positive thing that came out of this was that we found the state and county never had guidelines for handling packaged lettuce. We lobbied them to establish guidelines,” says Hill. That proved to be an education for the health departments, as well as the restaurant.

After the incident, the local and state health departments recommended that restaurants wash prewashed, bagged lettuce. But recently, the health department, having completed more research, issued new recommendations. Those guidelines state that restaurants should not wash produce labeled “prewashed” or “ready to eat” because of the potential for cross-contamination.

The local media covered health officials praising Pat & Oscar’s cooperation and tenacity in finding the problem. The media also reported that Pat & Oscar’s units had not received less than a top grade from health inspectors in a decade.

The Cost of Doing Right
In some of the units, Pat & Oscar’s lost 70 percent of business during the outbreak, according to Fink. The San Diego Union Tribune newspaper reported in November that sales plummeted systemwide, with catering sales hit the hardest.

The chain’s unexpected costs included discarding food and damage-control measures such as hiring Lexicon, buying advertisements in local media and giving away free meals.

Fink and Pat & Oscar’s will not disclose the costs incurred. “The cost is irrelevant,” says Fink, “What’s important is that we were earning back trust. There were no limits put on spending.”

“I know that had to be an expensive proposition,” Belch observes. “But just running ads and conducting PR is expensive, too. And there are no guarantees that will work.”