Leaders take a new approach to crisis management

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In a typical risk/crisis-management session, business leaders gather together and populate a risk/crisis matrix, which in some form looks like the chart below.

Risks and potential crises that are considered seriously impactful if they occur and are most likely to occur in the foreseeable future are placed in the top right-hand quadrant. These are the ones that must be managed, either through contingency planning, insurance, taking protective measures, communications planning, or a combination of strategies.

In my experience, most risk and crisis analyses for restaurants did not identify a viral pandemic as the number-1 potential crisis that could affect the business. Similarly, social-media threats, supply-chain disruptions and labour shortages were not ranked particularly high as risks or crises requiring thoughtful and careful management.

The current and continuing COVID-19 pandemic has taught us that typical risk and crisis-assessment sessions must be conducted more often, and thinking must be expanded when identifying inputs and management strategies. Few restaurants, for example, had addressed the possible need to have PPE. Despite not having protective measures such as this in place, we witnessed how quickly the industry reacted to the pandemic. Sourcing and implementing PPE, developing policies, modifying menus, embracing delivery modules and re-negotiating rents are just some examples of how the industry reacted to the pandemic without much pre-planning, if any. Instead of being prepared for it, the industry reacted to the crisis. In most cases, restaurant and restaurant system owners faced the crisis from the following perspectives: (1) find a way to survive; (2) make decisions quickly; (3) innovate however necessary; and (4) look for opportunities.

As we emerge from the pandemic and settle into an accepted reality of living in an endemic, risk and crisis-management exercises need to adapt to the experience of the pandemic. The matrix itself has not changed, but inputs into populating it and solutions to be considered and implemented ought definitely to have changed. It’s also apparent that these sessions must themselves be led differently.

As we’ve seen by the reactions to the pandemic, it becomes more important that these sessions put a higher premium on the topics of innovations and opportunities as key elements of the management of potential future crises. The following discussion is intended to reveal that current risk and crisis-management strategies require a level of sophistication not previously applied.

Due to current technologies, restaurants have tremendous and previously unheard-of tools to drive traffic to their establishments. The opportunities to obtain and mine data and target prospective customers has never been greater.

In the world of franchising, it’s often been said there are more opportunities for franchisees to be successful by taking over failed locations than in investing in new ones. There was one large caveat to this thinking, and that was whether the exiting operator had tarnished the local customer base such that it was not going to return. In that event, the better approach was not to sell the restaurant to the next person, as a subsequent failure could be expected to be inevitable if customers would not be returning. As such, restaurant franchisors have always appreciated it was better to have a low volume unit and happy customers than a busy unit with unhappy customers. The first scenario provides options and opportunity. The second, if not salvaged, presents the opposite. It’s also appreciated that restaurants that treat their customers well and have a desirable offering, but which may be suffering from excessive competition or lack of outside awareness, can now flourish with properly-directed investments in technology.

Driving traffic to one’s restaurant, therefore, is counter-productive if the customers are not leaving satisfied with their experience. What we realized from the pandemic is that although we can drive business to a restaurant like never before through technology, the crisis the pandemic presented was the threat to the on-premise experience caused by the resulting labour shortages and supply-chain challenges. In this situation, risk and crisis-management initiatives should be focused on the in-service experience, including the performance of a complete operational audit. The utilization of secret or mystery shoppers during the different day parts provides an excellent opportunity for restaurants to have their facilities and offerings assessed by an independent person at a reasonable cost. For a restaurant highly dependent on the quality of service or the availability of certain products, a crisis affecting services levels or the availability of certain products that has the real possibility of manifestation, is a crisis that ought to have found its way into the upper right-hand quadrant on the matrix and plans, whether actual or contingency, must be put in place to mitigate the effects of such a crisis materializing.

The risk and crisis-management process is a critical tool to not only manage and reduce risk, but an invaluable one in identifying areas where revenues can be increased and costs reduced. It’s one of the best exercises that can be undertaken to both measure the health of the business in the short, medium, and long terms and identify threats to its health, while potentially changing aspects of the business to increase its immediate profitability.

By Allan D.J. Dick – Sotos LLP assists restaurant and restaurant-system clients to evaluate risks and plan strategically. Allan D.J. Dick can be reached at adjdick@sotos.ca

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