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The Rats Of New York Teach The Produce Industry Some Lessons On Food Safety

A lot of people were watching rats scurry around a KFC/Taco Bell co-located unit this past weekend. If you didn’t see it, just click here or on the screen shot.

Pretty revolting to most people, especially if you had happened to have lunch there the day before you saw the video.

Yet there are several lessons directly relevant to food safety issues, to voluntary efforts and to United’s call for mandatory regulation.

LESSON ONE — Local Is Worldwide Now.

Within hours of the first news report appearing, the tape was on over a thousand web sites and being e-mailed around the world.

Yum Brands mishandled the Taco Bell/E. coli 0157:H7 issue, and it is mishandling this issue… and for the same reason. Yum Brands, the parent company, seems to have a wacky theory that the way to deal with issues is ignore them. If you go to the Yum Brands web site, you can’t find anything about this problem — no reassurance, no pictures of the CEO jetting to New York to take first-hand control, nothing.

If you go to the Taco Bell or KFC web sites, you find nothing on the home page. If you navigate through to the press release section, you can finally find this statement:


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 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 their health.

Yet, of course, in the relevant sense, it is not an isolated situation. Sure, there may not be rats scurrying around on video at other restaurants, but the sanitary conditions that would allow such a thing are obviously not prevented by the Yum Brands system of franchise inspections, the Yum Brands system of franchise selection, or the Yum brands system of franchise training.

In other words, the problem is not rats per se; the problem is cleanliness and the Yum Brands system obviously isn’t assuring it — which is a systemic problem, not an isolated incident.

The reputational damage will be enormous, especially following the spinach/E. coli situation — since the message consumers are getting is that Taco Bell and Yum brands don’t care about the health of their customers.

In a sense it is surprising this happened. Yum Brands has an enormous interest in preserving the value of its brands, and enforcing cleanliness is of obvious importance.

This, unfortunately, is a very important problem, but it is never urgent — or at least never until the rats are scurrying across every TV and computer in the country — and around the world.

Yum Brands didn’t fight back. It didn’t buy ads on search engines and web sites so that when consumers went looking for information they would get a positive story. It didn’t use its own websites to present an alternative narrative.

The easy availability today of cameras — think cell phones — combines with the immediacy of the internet to make what five years ago would have been a local problem into a worldwide disaster.

LESSON TWO — Private Businesses Have Trouble Enforcing Stiff Standards For Long Term Gain

The core problem with self-regulation: Although we can lay out the interests that Yum Brands has, we can also see clearly why they may not be actualized.

To start with, many of the “solutions” are systemic and have consequences in terms of slower growth.

McDonald’s is famous for having rich people approach it with prime pieces of land, asking to become McDonald’s franchisees — then McDonald’s turns them down, saying they would be happy to buy their land but they can’t have the franchise.

This goes back to Ray Kroc’s position that a franchisee should be a person and actually be working in the store. This was the best way to make sure the bathrooms were kept clean. It is why McDonalds, unlike many franchisors, doesn’t sell large territorial franchises. By contrast, when Boston Market was starting up and looking to jump-start its growth, it sold several states at a time to companies that committed to open set amounts of units in a set amount of time.

McDonald’s is an exception. Adopting these kinds of systemic solutions may mean losing out on a location, slower growth and other complicating factors.

So the temptation is to not look at setting up systems that will prevent the problem through culture and incentives but, instead, to do it through enforcement action.

Yet this has problems of its own. There is a large Hilton hotel right in the middle of O’Hare airport. For years it was a disaster area — in desperate need of renovation. When we stayed there during this period (the hotel has since been renovated), we called our friend, a high ranking Hilton executive.

He told us that they were well aware of the problem at Hilton headquarters and had been working on the owner for years to bring the hotel up to Hilton standards. The problem: Hilton only had a nuclear bomb to work with. It could break the affiliation, stop the hotel owner from the use of the Hilton name, and destroy any relationship with the property.

But this is the only hotel right in the airport — it is an irreplaceable asset. They didn’t want it to become a Hyatt or a Marriott. So, instead, Hilton talked for a long time to persuade the owners to fund the renovation, consciously allowing a sub-par property to function under its brand.

Voluntary efforts to control quality and safety often fail on account of the fact that the tools available are so blunt that they will cost the user a great deal — the loss of a hotel location or a restaurant franchise location.

LESSON THREE — Government Regulation Won’t Guarantee Safety

There are mandatory rules backed up by inspections all across America and certainly in New York City.

So, this was a “two-fer”. Voluntary efforts to maintain standards failed as Yum Brands was unable or unwilling to enforce its standards, and public regulation failed as New York City was unable or unwilling to enforce its standards.

Why might mandatory regulation fail? It could be the inspectors are busy and overworked and give a cursory inspection. It could be they are corrupt and accept bribes. It could be they want to be nice guys and make friends. It could be the standards are too low or enforcement lax, because the political consequences of closing down businesses are too great. Unemployed people, bankrupt business owners, landlords without tenants, less tax revenue, etc.

In 2006, the restaurant with the rats was cited 14 times for violations, including evidence of roaches or live roaches present in the restaurant’s food, evidence of mice or live mice present in the restaurant’s food and/or non-food areas, inadequate personal cleanliness.

In the past three years, this restaurant has been cited at least four times for rat or mice problems. But nothing happened. This information is public, but it didn’t lead Yum Brands to revoke the franchise, and it didn’t lead the New York City Health Department to shut the restaurant down.

Maybe the produce industry wants government regulation because it will co-opt the regulators so that next time there is an outbreak, they will look to label it as an aberration. But we shouldn’t kid ourselves that government regulation will assure safe produce. As we see, government regulation doesn’t assure clean restaurants.

LESSON FOUR — Incentives and Culture Trump Edicts

Neither the franchisor’s efforts nor regulatory efforts seem sufficient to keep the standards high. Which leads to the obvious question: Is there a solution at all?

What is clear is that real solutions won’t come from imposing edicts from above. The solution has to come from some combination of incentives and culture.

McDonald’s, in looking for that owner/franchisee, was betting that a combination of his incentive to attract patrons to his restaurant and his culture, as a prosperous middle-class businessperson in town, would lead to an implementation of McDonald’s protocols for cleanliness.

And what those rats running around a New York City KFC/Taco Bell are telling us is that the focus on the stringency of the GAP documents may be misplaced. Those restaurants don’t need to develop unique protocols for cleanliness; they need to focus on implementation.

But you have a combination of incentives: Who actually had a personal incentive to hold up his hand and say, stop, we need to hire more people to maintain cleanliness standards? Who had the personal incentive to say, stop, we need to close down for two weeks and sanitize this place? Who had the personal incentive to say we have to spend money to deal with the basement?

In the past few months, most of the processors have announced that they are doing things, such as increasing the agitation on leafy greens, increasing the strength of the chlorine, changing water more frequently — all good but all things that could have been done before the outbreak. But who had the incentive to do anything like that?

On the manufacturing end, the question is how to structure things so that on that day when there are too many orders, too much stuff to run through the plant, someone has both the authority and motivation to say, no, we can’t increase through-put.

The grower efforts seem to pose the same dilemma: The stricter the standard, the stronger the motivation to disregard it. Make rules that say that if a pig is found in the fields, that field must be destroyed and you create a strong incentive for farmers to develop pig blindness.

We need to look hard at the way we structure things. Maybe processors have to contract for fields and take on the liability for the crop if a farmer discovers an animal in the field.

Then after we have all the incentives well aligned, we need to look at culture. What was it about the people who worked in this facility that made them think this was OK?

In the end, food safety depends on individuals having habits of diligence and exacting standards. In the end, to achieve food safety we may not need all these committees with food scientists. We may need some industrial psychologists.

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