Case Study

WENDY’S RELIES ON REPUTATION TO COMBAT “FINGER” FRAUD Duringdinner one evening at a Wendy’s restaurant in San Jose, California,Las Vegas resident Anna Ayala claimed she bit into a partial fingerthat had been served in a bowl of chili. The fingertip was aboutone- and one-half inches long. The woman told health authoritiesthat when she found the finger in her mouth, she spit it out andbegan vomiting. After investigators arrived, they closed therestaurant that evening and took the remainder of the chili foranalysis. Wendy’s employees were asked to show their hands toDepartment of Environmental Health employees after the March 22,2005, incident, and all were whole, prompting an investigation intothe source of the finger. No hand injuries were found among thesuppliers of ingredients to Wendy’s, either. Wendy’s conducted itsown investigation. A health department inspection found no problemsat the restaurant, and suppliers were ruled out as a source afteranalysis of the chili ingredients turned up no evidence of thefinger. Employees completed a polygraph test. Search for FingerLeads to Convictions A search for the owner of the finger began,with Wendy’s offering a $100,000 reward for information. A hotlinewas set up for use in offering information about its source. “Theonly thing we could think of is either somebody played a practicaljoke that went bad or it’s going to be fraud,” CEO Jack Schuesslertold the Associated Press. Following a tip, the finger wasidentified as the finger of one of the men who worked with Ayala’shusband. The injured co-worker told him the couple had offered him$250,000 not to report the plot. Ayala filed suit against Wendy’sin April, but then withdrew the suit. On April 21, Ayala wasarrested and charged with attempted grand theft. Police suspected she put the finger in the chili herself. The finger, theSanta Clara County coroner’s office told the Associated Press, “wasnot consistent with an object that has been cooked in chili at 170degrees for three hours.” In September, Ayala and her husbandpleaded guilty to attempted grand theft and conspiracy to file afalse insurance claim. She was sentenced to at least 9 years inprison, and her husband was sentenced to more than 12 years. Theywere ordered to pay about $170,000 in restitution for the wageslost by employees following the incident. In addition, the judgeordered them to pay almost $22 million to Wendy’s International andthe local owner of the restaurant; the corporations agreed not toseek the money if the couple never benefited from the hoax. Wendy’slater gave the $100,000 reward to two sources, one of whom was theemployer of the man whose finger was used in the hoax. The secondreward recipient was anonymous. Reactions to the Story Vary News ofthe supposed finger in the chili spread rapidly. Sales at Wendy’sdeclined, leading to dozens of employee layoffs and a reduction inhours the restaurants were open. The Associated Press reported thatthe Wendy’s lost $2.5 million in sales because of the incident,with the local restaurant losing almost $500,000. The 2005 annualreport noted that the incident hurt sales “not only in the WesternRegion, but also throughout the entire U.S. for months afterward.”Early in the scheme, Ayala and her attorney appeared on “GoodMorning America” and described the incident. She said, “Knowingthat there was a human remain in my mouth, you know, something inmy mouth, it’s disgusting.” Newspapers around the world recountedthe story. Late-night talk show hosts joked about theincident. Wendy’s Relies on the Strength of Its ReputationWendy’s sought help from the Ketchum agency. During theinvestigation of the incident, the nation’s third largest burgerchain did not alter its public communication strategy. No publicapology was offered customers, and executives were not asked to goon television to defend the restaurant’s reputation. Nationaladvertisements were not changed. The reputation of Ayala was notattacked. The chain did use daily crisis management conferencecalls with eight executives and attorneys to discuss the incident.The results of its internal investigation that cleared itsemployees and processes were announced only in a brief statement.However, once Ayala was arrested, the tactics changed. Within oneday, Wendy’s executives were involved in more than 2,000 nationalnewscasts. Denny Lynch, Wendy’s senior vice president forcommunication, appeared on the CBS Saturday Early Show on April 23.He was asked how the restaurant was planning to persuade customersto return. He said it would be the company’s reputation that woulddraw customers: A company’s reputation is built on the things thatit does every day; the food that it serves, the way it treats itscustomers, its employees in the communities that it is in. And weare hoping that America remembers the Wendy’s of a month ago, theWendy’s that is open for business and welcomes them. That is, thestrength of our company is our reputation. To help draw consumersback in, Wendy’s sponsored a national Customer Appreciation FreeJunior Frosty Giveaway and served 18 million customers over thethree-day period. The campaign won an honorable mention in crisiscommunication from PRWeek magazine in 2006. At the time of thecrisis, Wendy’s International, Inc. was the third largest burgerchain in the world, with more than 6,300 Wendy’s Old FashionedHamburgers restaurants in North America and more than 300international Wendy’s restaurants.

Question 2: (25 Marks) Discuss the PR tactics applied, and theobjectives of such tactics, evaluate such tactics and suggest otherPR programmes to be applied stating its objectives and the publicsto be addressed.