Domino’s Video Offers Food for Thought for Businesses

This past spring, a series of prank videos from a couple bored Domino’s employees captured the worldwide attention of the public and the media. Before they were removed from YouTube, they reportedly garnered a million views. In these videos, an employee put cheese up his nose, and farted and sneezed on sandwich fixings he was handling, while the narrator described how those sandwiches were on their way to customers. He also wiped his butt with a sponge and used it to wash dishes. The video went viral, generating a public relations nightmare for both the Domino’s franchise and the local franchisee (owner) in Conover, North Carolina. The employees were criminally charged with felony food tampering, although they have said that none of the tainted food was ever served. As a business attorney, I found the unfortunate situation to provide much food for thought for my clients, including the need for corporate damage prevention and control, and the pros and cons of owning a franchised business.

Corporate Damage Control

There are so many ways your business can receive intense negative publicity, whether it is a viral video, reports of a human finger in your food, or lead-based paint on your children’s toys. Even more everyday situations, such as customers posting scathing (and perhaps untrue) reviews online, immigration raids or widely publicized lawsuits, can potentially damage the reputation and profitability of a business.

It is important for companies to deal with emergencies quickly and intelligently. Damage control plans typically name a damage control team of executives from different areas of the company, including public relations, management, personnel (HR), security and any specialists that relate to the specific industry. This team brainstorms about “worst-case scenarios” and develops plans in advance to deal with the scenario.

The first hours after a crisis are critical, as the public is then forming its opinions. First impressions count. Domino’s made a deliberate decision not to respond to the videos immediately, thinking the story would peter out. See A Video Prank at Domino’s Taints Brand. To this day, there are people who believe that Domino’s employees actually served tainted food to customers, although the employees consistently claimed the videos were spoofs or jokes.

Your attorneys are a crucial part of the crisis response team. A proper investigation of the facts needs to be conducted, preserving evidence, employee confidences, and the privacy and reputations of those involved. It is important to find out the truth of allegations, whether the underlying situation be sexual harassment, product tampering or poor product performance. You will compound your problems a thousand-fold if you publicly blame a fiasco on an employee who later turned out to be completely innocent or to spend a lot of money denying product liability claims, only to have a private testing service release videos showing your product spontaneously combusting.

The PR team (often along with the attorneys to make sure no greater harm is done) will craft public statements, press releases, appearances by key company personnel, but the attorneys will help determine the proper legal response, including terminating an employee, filing criminal charges, bringing a civil suit for defamation, or sending a cease and desist letter. Often, as is the situation with the Domino’s case, these actions are taken simultaneously.

In addition to addressing the public relations aspects of a crisis, the company may well need to address internal culture, or lack of policies/training. For example, it is being debated whether a social media policy would have prevented the Domino’s fiasco. Others are calling for a new food safety czar at Domino’s. Personally, I think both of these responses are inappropriate in this case, but these are the right questions to ask.

Other actions that may help prevent a crisis:

• Treat your employees well and create a positive corporate culture. This may inspire loyalty to your business and mission, and will hopefully translate into better customer service, less whistle-blowing and less chance of getting hit by a runaway PR freight train. Remember, your brand is going to be represented to most customers by the lowliest employees. How they feel about their jobs and the company will be broadcast to the customer. Happy employees are more productive and offer better customer service.
• Don’t just have corporate policies, but train employees and enforce them. Having one and not following it is worse than not having one.

Ultimately, Domino’s did respond with Patrick Doyle, President, Domino’s U.S.A., releasing a video, also on YouTube.

Franchising

Another aspect of the Domino’s story that resonates with me is how much damage renegade employees have caused not just to the individual restaurant where they worked, but to every Domino’s location worldwide. I cannot think of a better example that illustrates both the benefits and drawbacks to owning a franchised business.

No question, Domino’s has been a very successful franchise, with more than 6,000 global outlets since its inception about 40 years ago. In this economy particularly, people losing their jobs may be tempted to go into business for themselves by buying a franchise business. There are dozens of articles claiming that franchises are recession-proof. There are plenty of companies that will, for a fee, help you select the right franchise opportunity.

The main reasons to buy a franchise are that you are provided with a proven business model; given administrative support; trained on all aspects of the business from hiring to making the product; and you will market known brands that will attract people to your location, often with a national or regional marketing campaign run by the franchisor in addition to your local efforts.

The main reasons not to buy a franchise are some franchise systems are new, weak or not well-developed; you won’t get enough administrative or operational support/training; you may be forced to buy supplies or raw materials from the franchisor at an inflated price, or the trademark/brand is tarnished or weak.

In fact, the main asset of a franchise is its brand or trademark. The customer’s loyalty is to the brand, NOT the individual franchisee. Nobody walks into a McDonald’s because they know the owner; they go because they want a Big Mac®, Coke® and fries. The quality of these items should be the same from Maine to California because every franchisee is supposed to make Big Macs® with the same ingredients and using the same system.

Chief among things to consider when evaluating a franchise opportunity is the reputation of the brand. What is especially unfair in the Domino’s affair is that every single Domino’s franchisee (local owner) suffered because of the two idiotic North Carolina employees who thought they were being cute on YouTube. Pointing out the obvious (and new!) power of social networking is Nightline reporter David Wright: “What seems to have changed is a couple yahoos in a pizza joint sticking cheese up their nose can threaten a global brand.”

So if you are planning to invest tens or hundreds of thousands of dollars to buy a franchise, it is important to do your homework. You should be given a Franchise Disclosure Document that contains financial information, lawsuits, bankruptcies, franchisees who have left the system and other important information. Have an accountant or financial advisor review the document and assess the profitability of the business, and have an attorney review the franchise agreement. You want to know what happens after the initial term of the franchise agreement, if the franchisor goes out of business, what types of fees you will pay to the franchisor, and what happens if you under-perform. You will also want to call a few existing franchisees to see what is going right and all the former franchisees to see what is going wrong. You may be able to determine a pattern that will deter you from that particular franchise.

Even with significant due diligence, any franchise is only as strong as its weakest link. Recent events demonstrate that a prank can capture the world’s attention for a few days and eat into your business. Search the franchise name online and you may discover just how strong, or vulnerable, it is at the moment. Even for non-franchise businesses, it is vital to monitor your trademarks and public relations. A scathing (and perhaps unfair) review on a local business review site can do as much damage to your business as a snafu with a random franchise across the country can do to a franchise business.