Case Study - An Analysis of Subway’s Response to Fake Chicken PDF

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A Crisis Management Analysis of Subway’s Response to Fake Chicken....

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What’s in Your Subway Chicken Sandwich?: An Analysis of Subway’s Response to Fake Chicken

Abstract With a few rough years on Subway’s timeline, the Canadian Broadcasting Corporation Marketplace’s investigation on the DNA of chicken at multiple sandwich chains did not give Subway the boost it needed. Subway rebutted the claims from CBC on having less than 50 percent of real meat in their poultry, even conducting their own independent study to show that their initiatives to reduce

artificial ingredients is coming to completion. While the chain has lost numerous units in the recent years, Subway’s initiatives to focusing on providing the high quality food for its consumers all while creating a new space for them to be in are getting the chain off the downward spiral.

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Table of Contents Overview ……………………………………………………………………………………………….… 3 Company Background ……………………………………………………………………………….….. 4 History of Subway …………………………………………………………………………………….….. 4 Mission Statement ………………………………………………………………………………………… 4 Social Responsibility …………………………………………………………………………………….... 5 The Past Crises …………………………………………………………………………………….…….. 5 Timeline of Events ……...………………………………………………………………………………... 6 Crisis Communication Strategy ………....................…………………………………………………… 6 Response ………………………………………………………………………………………….............. 7 Public Response ………………………………………………………………………………………...… 7 Media Response …………………………………………………………………………………………... 8 Impact ……………………………………………………………………………....................……......... 9 Financial Impact ………………………………………………………………………………….............. 9 Reputational Impact ……………………………………………………………………………………..... 9 Crisis Communication Theories ……………………………………………………………………....... 9 Conclusion ………………………………………………………………………………......................... 11 References …………………………………………………………………………………………….… 12 Appendix A ………………………….......……………………………………………………………… 13 Appendix B ………………………….......……………………………………………………………… 19 Appendix C ………………………….......……………………………………………………………… 25

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Overview: A Canadian Food Fight In February of 2017, the Canadian Broadcasting Corporation (CBC) Marketplace conducted an investigation on the DNA of poultry in several popular chicken sandwiches and wraps. Two popular Subway sandwiches were found to be serving chicken with only about half of it with real chicken DNA. Matt Harnden, a DNA researcher at Trent University's Wildlife Forensic DNA Laboratory, tested the poultry in six popular chicken sandwiches from various fast-food joints, including McDonald’s and Wendy’s. The study was conducted by first testing two samples of of five of the meat products and one sample of the Subway strips. The researchers followed up on those samples by testing three smaller samples, averaging the DNA scores to come to a final conclusion. Most of the scores were very close to the 100 percent of an unadulterated piece of chicken. However, the research team tested Subway’s meat again since it was such an outlier. Five new oven roasted chicken pieces and five new orders of chicken strips were tested, average score results coming in at 53.6 percent chicken DNA in the oven roasted chicken and 42.8 percent chicken DNA in the chicken strips, being painfully short of what Subway represents. Researchers offered that the remaining DNA of these poultry samples are made up of soy, catching the attention of many as the news story broke in the United States and Canada with many headlines reading along the lines of “Subway Chicken only about 50% meat, according to Canadian study”. CBS did reach out to all of the chains that were tested to gain their response on the investigation. Subway’s immediate response to these claims offered that they were misleading stating, “Our recipe calls for one percent or less of soy protein in our chicken products," (Evans, P., & Szeto, E., 2017).

(Source: Company Response, 2017) Later in the week, Subway issued a statement saying it had commissioned its own lab tests in response to the CBC’s misleading report. Their testing resulted in the chicken only containing trace amounts of soy. Subway hired Maxxam Analytics in Canada and Florida’s Elisa Technologies to independently test pieces of chicken from the Canada locations and evaluate the soy protein they contain. After the completion of this research, there was less than 10 parts per million, or below 1 percent of the sample, that contained the soy protein. Subway added that, “These findings are consistent with the low levels of soy protein that we add with the spices and marinade to help keep the products moist and flavorful,” (Guarino, 2017). In March 2017, Subway issued a Note of Action in Canada against CBC Marketplace , asking for $210 million in damages due to the allegations that were misrepresenting and and defamatory. However, CBC told Fortune that the broadcaster would file a statement of defense rather than the whole organization, (Samuelson, 2017).

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Company Background History of Subway Fred Deluca had a dream of becoming a medical doctor and in 1965 he set out to reach that goal. Like most students, he needed to find a way to help pay for medical school and when a family friend suggested he open a submarine sandwich shop Deluca took up the offer. He got a loan of $1,000 and partnered with his friend Dr. Peter Duck. In August, 1965 the first sub shop opened up in Bridgeport, Connecticut. Together, Deluca and Duck set a goal of opening 32 stores within the first ten years of business. The easy lessons that serve as the foundation for Subway’s success today around the world were the basics Fred first learned on how to run a business and the importance of serving high quality products and excellent customer service (Subway, History).

(Source: Subway, History) In 1974 they realized that they would not reach their goal of opening 32 stores considering the duo only owned and operated 16 shops throughout Connecticut. Falling halfway short of this goal led them to begin franchising, launching the SUBWAY® brand into something that is still growing today (Subway, History). The SUBWAY® brand today is one of the largest marine sandwich chain’s in the world having more than 44,000 locations. Mission Statement Subway does not have an official mission statement on their website or any statement on the bottom of their press releases that express their mission as a company. However, in 2013 they released this statement: “To provide the tools and knowledge to allow entrepreneurs to compete successfully in the Fast Food industry worldwide, by consistently offering value to consumers through providing great tasting food that is good for them and made the way they want it.”

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Social Responsibility SUBWAY® is committed to providing a wide range of great tasting, healthier food choices while reducing the environmental footprint and creating a positive influence in the communities they serve around the world. Included in these responsibilities are the following: -

Nutritional Leadership Environmental Leadership Sustainable Sourcing Our People, Our Communities Sponsorship & Donation

The Past Crises In 2014, Subway experienced one of its first major crises when a food blogger, Vani Hari, petitioned the chain to remove a chemical in its bread dubbed as the “yoga mat chemical”. The bad publicity of this blog post forced Subway to make some major changes to its food ingredients. In a statement released shortly after the February blog post, Subway stated that they had been working to eliminate this chemical before the blog post surfaced. While this may just be denial from the organization, they attempted to use corrective action by pledging to remove all artificial ingredients from its food in North America by 2017 (Subway, 2014). Due to the rising initiatives for consumers to stick to healthy eating, not only did this prompt Subway to change their recipes but various other food makers as well. A crisis that hit the Subway franchise hard first began on April 24, 1999 when Indiana University ran a story in their school newspaper about Jared Fogle, a senior at the University who lost 245 pounds by changing his diet to only eating two Subway sandwiches a day and exercising.

(Source: Staff, 2017) After being featured in Men’s Health, Fogle became the face of Subway for the next fifteen years, helping the chain promote healthy eating lifestyles. However, in 2015 that all came to an end when Fogle pleaded guilty to charges of repeatedly paying to engage in sexually explicit acts with children and receiving and distributing child pornography (Phillip, 2015). While Subway made a statement that they were shocked when they first learned about these charges, their image still took a downward hit. Shortly after, as the new year of 2017 began Subway was hit with another crisis as CBC Marketplace aired a video accusing Subway chicken meat to be less than 50 percent real.

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Timeline ● ● ●

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July 2016: CBC Marketplace submits a list of menu items, containing cooked chicken meat, from local fast-food chain restaurants to the NRDPFC. December 2016: A second set of samples are requested by CBC and was collected from various Subway shops and processed. February 24, 2017: CBC Marketplace aired a segment called “The Chicken Challenge”, publishing their investigation findings on the DNA analysis of five fast food poultry meats. CBC claiming that Subway’s oven-roasted chicken was only made up of 53.6 percent chicken and their chicken strips only bore approximately 42.8 percent poultry. All five restaurant chains respond to the CBC investigation. February 28, 2017: Jeff Lanteigne, the Vice President of Product Development and Quality Assurance at Grand River Foods releases a statement on behalf of the company rejecting CBC’s reports and stating to conduct their own testing. March 1, 2017: A Subway spokesperson empathetically rejects CBC’s claims by saying, "The accusations made by CBC Marketplace about the content of our chicken are absolutely false and misleading. Our chicken is 100% white meat with seasonings, marinated and delivered to our stores as a finished, cooked product," the spokesman said in a statement sent to NPR. "We have advised them of our strong objections. We do not know how they produced such unreliable and factually incorrect data, but we are insisting on a full retraction,” (Domonoske, 2017). Subway releases its findings from its own investigation on the DNA of its chicken meat (see Appendix A). CBC Marketplace and the lab that conducted the investigation stands by their report and release the study. March 5, 2017: TIME received a statement from a Subway representative that said, “Test results from laboratories in Canada and the U.S. clearly show that the Canadian chicken products tested had only trace amounts of soy, contradicting the accusations made during the broadcast of CBC Marketplace,” (MacMillan, 2017) March 6, 2017: Subway releases the lab reports from both of its independent tests (see Appendix B and C), (Mole, 2017). March 12, 2017: Subway issues a Note of Action in Canada against CBC asking for $210 million in damages over the Marketplace allegations (Samuelson, 2017). April 27, 2017: Dr. Oz investigates new allegations by independently testing chicken samples of various fast food outlets and confirms Subway chicken quality in the U.S.

Crisis Communication Strategy: Chickening Out? Oh No. Subway responded by denying the accusations as well as telling the public they would conduct their own tests to prove it. One significant threat that was spread by this crisis would be the company’s reputation. Since Subway is so well-known worldwide, consumers began to question the quality of their sandwiches. After the crisis, Subway came out and conducted their own tests to prove that their meat is 100% or close to it. Subway responded by pledging to retract the chemical they use in their meat as a preservatives and pledged that next year to remove all artificial ingredients from its food in North America in 2017. When CBC came out with its broadcast on February 24 accusing Subway of using chicken with less than 50 percent of real chicken DNA, Subway responded immediately and consistently. The first response from Subway was available on CBC’s website since they reached out to each of the of the chains they tested. Subway did not confirm CBC’s findings, evading the responsibility of this cause at first to gain time to understand the results of the lab testing. While they tried to promote their products in this statement based on their food quality, Subway also offered to have a further look into this by contacting

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their food supplier to ensure their food quality was keeping up with Subway standards and using denial to possibly give the responsibility of this scandal to a different source. There were numerous threats of the DNA testing, one being that consumers would stop visiting Subway and a second being that consumers did not trust the ingredients of Subway meat. This crisis had the ability to spread rapidly across the world, and it did as it was published in numerous news sources worldwide after it was first aired on CBC. However, the responses that Subway continually gave allowed the threats of these allegations to fold. What helped Subway drastically in this crisis was their ability to constantly provide updates to their publics and audience. Subway released their own news release a few days later on March 1 explaining how their initiative to do their own study on their chicken proved CBC wrong. Their informational news release provides minimization on the issue considering it is providing information to show the situation is not as bad as CBC states.

(Source: Mole, 2017) As CBC continued to stand by their report and refuse to retract their story, Subway continued to reach out to various news outlets and communicate the company values along with providing what their study had shown. On March 6, just two weeks after the release of this information, Subway filed a Note of Action in Canada against CBC hoping to gain compensation for the hit its reputation and brand suffered due to the false allegations.

Response Public Response The public immediately began taking sides when the news broke out about fake meat. When CBC Marketplace conducted its taste testing, a Toronto resident participant, Irena Valenta, said after seeing the test results, “That's misrepresentation,” of what Subway stands for (Evans, P., & Szeto, E., 2017). There were other particapants who spoke out about the results during the testing as well. Once the story hit social media, publics were fast to reply to the case online. Some publics responded by asking their own questions, even going as far as to suggest what either of the oganization should do next.

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(Source: Sethi, 2017) Other publics simply stated that they did not trust the allegations brought forth by CBC.

(Source: Rodriguez, 2017) Media Response Even though these allegations were formed in Canada, news media and blogs around the world began to cover Marketplace’s investigation. Major news outlets including New York Post, NPR, TIME, Fortune, to name a few, covered the event along with a variety of other major news sources.There was steady news coverages through April 2017, covering the responses of both parties along with the ideas of Subway filing a lawsuit against CBC.

(Source: Kosman, 2017) Many news outlets remained neutral when reporting on the case, attempting to explain the investigation completed by CBC and show how Subway rejected these clauses. Spokespeople from parties reached out to numerous news outlets throughout the height of the issue providing them with various statements. However, once Subway filed their lawsuit against CBC in March, coverage by news sources dropped increasingly to where information to the public is left unknown.

Impact

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Financial Impact In the past few years Subway’s unit count has declined drastically, having 27,103 locations in 2014 and then finishing 2016 with 26,744 locations resulting in a loss of over 350 locations. This can be simply explained due to the decline of same-store sales falling since 2012, which is followed by unit count. To help recover the sale loss and unit closures Subway has cut back on the unit growth. Subway has also experienced a 15 percent decline in its estimated unit sales, where in 2016 the number was only at $420,000. Many believe this was contributed by the 2015 arrest of the longtime, wellknown spokesman of Subway, Jared Fogle, however the decline is still occuring due to the consistence of crises.

(Source: Patton, 2017) Most financial information is hard to find since Subway is a privately-owned company. However, Chief Development Officer Don Fertman said in an email, “Our development program emphasizes a smart growth strategy aimed at strategic development to ensure Subway franchisees have the greatest opportunities to successfully grow their businesses. Our market realignment has included closing some locations as market conditions have changed,” (Maze, 2017). The goal for Subway from 2016 and currently is to strengthen the brand in each market it is in. A key to this is focusing on generating organic sales to help sought through their own turnaround. Along with this comes the upgrading in the quality of its products along with gaining better in-store technology to help refine operations. Reputational Response While Subway has had to deal with a variety of financial losses over the past few years, their reputation did not take as big of a hit as this scandal thought it would. Many public resposnes were short and inconsistent and even with national coverage, the scandal was only prominent to Canadian locations, allowing consumers to say that they would order a subway sandwich if they wanted to because CBC would not dissuade them (Mole, 2017). While the lawsuit filed has yet to be concluded, the consistency of Subway’s communication with its publics and their continuancy to improve has allowed their reputation to not dwindle.

Crisis Communication Theory Over the past few years, Subway has taken a hard hit as it struggles to generate sales. Along with three major crises that have happened within four years, Subway has experienced a decline in both unit count and sales count. However, along the way they have used the crisis communication theory of image restoration in order to help boost their now “average” company.

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During the 2017 crisis where CBC questioned if Subway used real chicken in some of its sandwiches, Subway took first to evading responsibility saying that while their chicken was less than 1% soy and shifting the light on their supplier. They used defeasibility due to the lack of information and control they had over the study, however by saying that they would look into their poultry shed light on the fact that they cared about the issue at stake. Subway created a consistent crisis communication flow with its publics, regularly updating them and sending out statements on the organization. One of the first initiatives Subway took to reduce the offensiveness of the allegations brought upon the chain was to attack the accuser. Subway did this by hiring two companies to do independent studies of their chicken meat. When the results came back there were only trace amounts of soy protein in the meat, nearly opposite of the accusations made by CBC. This help divert attention away from Subway and onto questioning CBC’s study. Other than the multiple statements given out to various new sources, Subway also took it upon themselves to create a special link on their Canada website to address the commitment they have to their customers. This is a form of corrective action even though there has only been one study to prove where Subway could have gone wrong with its chicken ingredients, Subway still took it upon themself as an organization to reshare their commitment as a chain.

(Source: Subway, Our Commitment to Our Customers)