Kentucky Fried Chicken: Crisis Communication-Rat Trap!

 
Kentucky Fried Chicken: Crisis Communication-Rat Trap!
case 1-429-078
                                                                                                                 July 21, 2010

Kentucky Fried Chicken:
Crisis Communication—Rat Trap!
Introduction

                                                           PY
     It is every business executive’s nightmare to wake up in the morning to find her company is making
the headlines for all the wrong reasons. Industrial action, consumer boycotts, financial irregularities, work-
related accidents, and product faults are just some of the red-alert issues that can disrupt the normalcy of
corporate business life. This was exactly what happened to the world’s largest fast-food company. An isolated
incident at a KFC/Taco Bell restaurant outlet at 331 6th Avenue in Greenwich Village, New York City, owned
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by ADF Corporation, sent shockwaves through the franchise parent company, Yum! Brands, Inc. The incident
was an infestation of rats at the Greenwich Village restaurant that was filmed live on U.S. television. This
caused a media frenzy and sent management at Yum! Brands, Inc. into a tailspin.

Background
                        T
    The KFC/Taco Bell at 331 6th Avenue in Manhattan was typical of thousands of fast-food outlets in the
United States. It was not only convenient for grabbing a quick bite, but it was also a place to meet and
                      NO

hang out with family and friends. Food hygiene is of paramount importance to any fast-food company. The
NYC Health Department conducted annual inspections of food-service establishments (including restaurants)
to ensure that food safety standards were met. The KFC/Taco Bell restaurant had held a Health Department
permit since October 1998.

Customers Smell a Rat
 DO

December 11, 2006
    An annual inspection was conducted at the KFC/Taco Bell restaurant.1 Violation points were assigned
based on the severity and extent of the violation. A score of 27 or less was needed for a restaurant to
pass the inspection.2 The inspection identified seven violations, including rodent droppings and conditions
conducive to rats, but the restaurant passed the inspection with a score of 20 points.3

December 23, 2006
     A caller complained to New York City’s 311 government hotline that rats were running around in the
restaurant. A warning letter was sent.
                Published by GlobaLens, a division of The William Davidson Institute at The University of Michigan.
                ©2010, Glyn Atwal and Douglas Bryson. This case was written by Glyn Atwal and Douglas Bryson, ESC Rennes School
                of Business, France. The authors would like to thank Zohour Berrisoul, Stephanie Charro, and Jessica Graham for their
                valuable contributions.
Kentucky Fried Chicken: Crisis Communication-Rat Trap!
Kentucky Fried Chicken: Crisis Communication—Rat Trap!                                                   1-429-078

February 3, 2007
    A caller complained via 311 that rats were seen in the restaurant. A warning letter was sent.

February 11, 2007
    A caller complained via 311 that five rats were seen behind the counter. A warning letter was sent.

                                                  Figure 1
                                  You Tube: Kentucky Fried What4

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February 12, 2007
                                                     CO
    A caller complained via 311 of rats in the restaurant and a warning letter was sent.
                           T
The transcription of the call was noted:
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         He works at the Taco Bell and he has seen rats and rodent droppings in the oil where the
         food is fried, in the corn and nachos, and on soda machines. In addition, caller [says]
         the owner and the managers are not doing anything to fix the problem at all, and if a
         customer [says] they have seen rodents, they are given their food for free. Caller also
         [says] workers are told not to eat the food. Caller [says] there are 2 restaurants in one and
         they both have the problem. The restaurants are Taco Bell/KFC. Caller [says] the basement
         is the worst place of all. An employee was bit by a rat in the basement and did nothing
         about it.
    DO

February 22, 2007
    The Health Department conducted a complaint-specific inspection of the restaurant. A failing inspection
score issued by the Health Department was 28 or above. The restaurant passed the inspection with ten
points: eight points for evidence of rats and two points for conditions conducive to rodent infestation.

The Year of the Rat

February 23, 2007 (1:18 AM to 4:52 AM)
     One day after the outlet had passed a Health Department inspection, the 311 hotline received three
calls complaining of up to 50 rats inside the KFC/Taco Bell restaurant, which had closed for the evening.

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Kentucky Fried Chicken: Crisis Communication-Rat Trap!
Kentucky Fried Chicken: Crisis Communication—Rat Trap!                                                 1-429-078

February 23, 2007 (by 10 AM)
     Local TV stations started to broadcast reports of an infestation of rats inside the KFC/Taco Bell
restaurant. For example, Fox 5 and CBS 2 reported directly in front of the restaurant with live images of rats
scurrying around inside. The news crew also interviewed customers who expressed their disgust:
         I used to eat in here…It is unbelievable. I won’t eat here again. That is for sure. You can
         count on that.5

                                        Figure 2
                      You Tube: One of Many Disgusted Customers6

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                                                    CO
    The share price of Yum! Brands, Inc. was down more than 1.5% to $60.12 in early trading.
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The Media Feeding Frenzy: A Rat Race
                         NO

February 23, 2007 (Midday)
     According to a Technorati search, more than 1,000 blogs had cited or spread the story and footage of
rats inside the KFC/Taco Bell restaurant. A search on Google News for “rats and KFC” yielded 443 stories, and
“rats and Taco Bell” produced some 600 stories that were posted on websites of publications.7

                                       Figure 3
                    You Tube: News Frenzy at KFC Greenwich Green8
    DO

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Kentucky Fried Chicken: Crisis Communication-Rat Trap!
Kentucky Fried Chicken: Crisis Communication—Rat Trap!                                             1-429-078

February 23, 2007 (4 PM)
    At the close of trading, the share price of Yum! Brands, Inc. fell by 0.9% at $60.51.

                                                Figure 4
                                      KFC under Satire Attack9

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                                                Figure 5
                               You Tube: Fox Goes After the Rats10
                          T
                        NO
    DO

February 24, 2007 – March 2007
     The news of rats inside the KFC/Taco Bell restaurant continued to spread like wildfire. Newspapers from
the tabloids (yellow press) to the broadsheets picked up the story. Mainstream business magazines also
joined the media bandwagon. The coverage helped to turn the story into a hot-issue crisis. Bloggers were
keen to voice their views and opinions. Social networking sites generated even greater viral interest. For
instance, TV news reports and amateur video footage were uploaded on news sites and video-sharing sites.11
KFC/Taco Bell became a target for satire. Videos were uploaded that mocked KFC and the rat invasion.12 This
was not merely a local or national crisis. This was a crisis with global implications for the KFC/Taco Bell
brand. Wall-to-wall TV coverage led to a media domino effect. International news channels such as CNN
International reported on the incident.13

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Kentucky Fried Chicken: Crisis Communication-Rat Trap!
Kentucky Fried Chicken: Crisis Communication—Rat Trap!                                                1-429-078

Like Rats from a Sinking Ship

February 23, 2007
    The Health Department began a full initial inspection, and the inspector prevented the restaurant from
opening for the day.

                                                Figure 6
                               You Tube: Looking for a Way Out14

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Yum! Brands, Inc. responded with the following statement that was posted on the company’s website:15
        This is an isolated incident at a single restaurant at 331 6th Avenue in Greenwich Village,
        New York, and it is totally unacceptable. The restaurant is closed and we will not allow it
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        to be reopened until it has been sanitized and given a complete clean bill of health. We
        want to assure our customers that nothing is more important to us than food safety and
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        their health.

February 27, 2007
    This was followed by a second statement, from KFC Corporation President Gregg Dedrick, that was
posted on the company’s website:16
        We want to reassure our customers that we take this isolated incident in Greenwich
        Village, NY, very seriously and apologize for any inconvenience this may have caused. We
    DO

        believe each of our brands has the highest restaurant quality standards and they are being
        followed. We want to reassure customers that our restaurants are clean and safe. We will
        continue to work closely with the New York City Health Department and if there’s ever an
        issue, we will immediately resolve it.

February 28, 2007
     The Health Department conducted inspections of 11 ADF restaurants in New York City; three were closed
for health risks and extensive unsanitary conditions.

     A press statement17 and a videotaped message18 were posted on Yum! Brands’ website. Emil Brolick,
president of U.S. Brands, apologized for the incident (without mentioning rats or rodents) and reassured
customers that Yum! was taking necessary measures to ensure high food-hygiene standards:
                                                    5
Kentucky Fried Chicken: Crisis Communication-Rat Trap!
Kentucky Fried Chicken: Crisis Communication—Rat Trap!                                             1-429-078

         I want to reassure all of you, our valued customers, that we have taken what has
         happened in New York very seriously. We are very proud of our brands, and quite
         frankly, we are embarrassed that this has happened. On behalf of our restaurant teams
         who work hard to satisfy you, I want to apologize. We are absolutely committed to
         you, our customers, and have worked with the franchisee to close the uninspected
         restaurants in New York. We will not open them until the Health Department has
         fully inspected and given them a clean bill of health. We will not compromise
         on our food and our restaurant quality. That’s our promise and commitment to you.

March 1, 2007
    ADF Corporation closed the remaining 10 restaurants before the Health Department could initiate
inspections.

                                                      PY
March 2, 2007
     A press statement19 and videotaped message20 were posted on Yum! Brands’ website. Brolick again
apologized for the incident: “I want to take the moment to again apologize to our customers for what has
happened to our NYC restaurants. I am here to reassure you that we have been working around the clock to
prevent this happening again.” He outlined immediate measures to address the issue of health and safety at

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KFC/Taco Bell restaurants. This included the engagement of a pest control expert to review the application
of standards required of operators in New York City. Brolick also reconfirmed that all ADF restaurants in New
York City would be fully inspected and given a clean bill of health before they reopened.

The Company – Rat Poisoned?

     Yum! Brands, Inc. was the world’s largest fast-food company, with more than 37,000 restaurants in
                          T
over 110 countries and nearly $11 billion in revenue in 2009. Four of its restaurant brands – KFC, Pizza Hut,
Taco Bell, and Long John Silver’s – were the global leaders of the chicken, pizza, Mexican-style food, and
                        NO

quick-service seafood categories.21 The company had recently received widespread negative media coverage.
In December 2006, Taco Bell was linked to a high-profile outbreak of E. coli as a result of lettuce supplied
to restaurants in the U.S. Northeast. The incident had serious implications for the brand image, customer
confidence, and ultimately the balance sheet. According to the Chief Financial Officer of Yum! Brands Inc.,
the E. coli crisis had cost the company $20 million in operating profits.22

Tasks:
    DO

    1.   Provide an overall evaluation of Yum! Brands Inc.’s handling of the situation.
    2.   How much damage to the company and its brands results from incidents such as these?
    3.   What kind of short-term responses by consumers can be expected? What kind of long-term responses
         might be expected?
    4.   Besides consumers, what other stakeholders might react and how, over both short and long terms?
    5.   If you were to give advice to the Board of Directors from the start and then all the way through the
         situation, what would it be? How would it change with the changing circumstances? Use a time line
         if necessary to be clear with your recommendations and implementation of these actions.
    6.   Discuss the lessons this situation provides for crisis communication in general.

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Kentucky Fried Chicken: Crisis Communication-Rat Trap!
Kentucky Fried Chicken: Crisis Communication—Rat Trap!                                                                         1-429-078

Endnotes

1    Time line is based on Report on the KFC/Taco Bell Rodent Infestation in Greenwich Village by NYC Department of Health and
      Mental Hygiene, http://www.nyc.gov/html/doh/downloads/pdf/public/dohmhnews-tacobellkfc-report.pdf.
2     Inspection Worksheet that lists all possible violations and the point value assigned to each violation can be accessed at http://
     www.nyc.gov/html/doh/downloads/pdf/inspect/foodservicescoresheet.pdf.
3    Results of inspected restaurants are published online and can be accessed at http://167.153.150.32/RI/web/index.
     do?method=goldenAppleList.
4    KFC secret spice revealed, http://www.youtube.com/watch?v=dXLOC3fK264.
5    Rats Take Over KFC/Taco Bell, http://www.youtube.com/watch?v=su0U37w2tws&feature=player_embedded#^.
6     Rats Take Over KFC/Taco Bell, http://www.youtube.com/watch?v=su0U37w2tws&feature=player_embedded#^.
7    KFC Reputation Management Failure, February 26, 2007, http://www.social-media-optimization.com/2007/02/kfcs-reputation-
      management-failure/.
8     KFC secret spice revealed, http://www.youtube.com/watch?v=dXLOC3fK264.

                                                                     PY
9    Rats pictures, http://www.freakingnews.com/Rats-Pictures-33454.asp.
10    Rats Take Over KFC/Taco Bell, http://www.youtube.com/watch?v=su0U37w2tws&feature=player_embedded#^.
11   Rats at Taco Bell/KFC in NYC, http://www.youtube.com/watch?v=qvLDFtaL5HI.
12    TACO BELL RATS, http:// www.youtube.com/watch?v=Uj6-Zxzd16s&feature=fvsr.
13   Rats in New York City Taco Bell/KFC, http://www.youtube.com/watch?v=sdVLJhWhnyQ.

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14    Rats Take Over KFC/Taco Bell, http://www.youtube.com/watch?v=su0U37w2tws&feature=player_embedded#^.
15   KFC/Taco Bell responds to isolated Greenwich Village, NY pest control incident, February 23, 2007, http://www.kfc.com/about/
      newsroom/022307.asp.
16    KFC and Taco Bell Respond to New York City Department of Health Commissioner, February 27, 2007, http://www.kfc.com/about/
     newsroom/022707.asp.
17   KFC Update for New York City Customers, February 28, 2007, http://www.kfc.com/about/newsroom/022807.asp.
18   Yum! Brands U.S. President Emil Brolick update for New York City customers, February 28, 2007, www.kfc.com/about/
                                   T
      newsroom/022807/popup_video_brolick.asp.
19    Yum! Brands Engages Pest Control Expert for Urban Settings, March 2, 2007, http://www.kfc.com/about/newsroom/030207.asp.
     Yum! Brands U.S. President Emil Brolick update for New York City customers, March 2, 2007, www.kfc.com/about/
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20

      newsroom/030207/popup_video_brolick.asp.
21
     Yum! Brands, http://www.yum.com/company/ourbrands.asp.
22   Scott, E., Taco Bell and KFC: Not so YUM-my?, February 23, 2007, http://articles.moneycentral.msn.com/Investing/Dispatch/
     TacoBellAndKFCNotSoYummy.aspx.
       DO

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