FEMA's Waffle House Index

Working Like Waffle House

FEMA gauges disaster severity by how many Waffle House restaurants are open.
By: | November 1, 2013 • 9 min read

The category EF5 tornado that tore through Moore, Okla., on May 20 etched a 17-mile path of destruction through thousands of homes and businesses, three schools and one hospital.

Estimates of insured losses reached $2 billion in the first 24 hours after the disaster, topping the cost of the twister that ravaged Joplin, Mo., in 2011. Sitting about three-quarters of a mile south of the tornado’s path, near 19th Street and Tower Drive, sat the local Waffle House.

“It was down without power, and the town was just devastated,” said Waffle House Vice President of Culture Pat Warner. “A normal 20-minute drive to work took about three hours to get around all the debris and roadblocks.”

Employees of the restaurant, however, were undeterred. Warner said the workers convinced a sheriff’s deputy to let them into the limited-access area in order to “get the restaurant open for our customers.”

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“If you have a storm and you can get a restaurant operational quickly that can provide water and food, that’s a really good thing because otherwise people go hungry,” said Ted Devine, CEO of insureon, a small business insurance provider.

Though its power was knocked out, Moore’s Waffle House sustained no physical damage. It procured a backup generator and was serving up hot meals to neighbors and relief workers within two days after the tornado hit.

But quick recovery is nothing new for the popular breakfast destination.

Waffle House spokeswoman Kelly Thrasher said that Hurricane Katrina in 2005 forced 100 restaurants to close, and 60 were able to reopen within one day.

R11-13p72-74_11Waffle.indd” … If you don’t have a plan and know exactly what you’re going to do when the event happens, you’re [in trouble].”
— Ted Devine, CEO, insureon

 

In 2011, restaurants affected by deadly tornadoes in Alabama and Missouri and by Hurricane Irene along the Southeast coastal region saw similarly speedy recoveries, she said. Waffle House’s ability to get up and running so quickly in the wake of disaster has earned it a stellar crisis management reputation.

So much so that the “Waffle House Index” has become a mainstay in the damage analysis toolbox of FEMA Administrator Craig Fugate.

The Waffle House Index — seeing if the local Waffle House is open and fully operational — is the informal way Fugate measures a community’s post-disaster damage and potential speed of recovery. A closed restaurant is coded red; an open restaurant serving a limited menu is yellow, and an open establishment with a full menu is green.

Fugate hatched the idea of the Index while surveying tornado damage in 2011: “If you get there and the Waffle House is closed? That’s really bad. That’s where you go to work,” he said.

Panos Kouvelis, an Olin Business School professor at Washington University in St. Louis and an expert in supply chain management, said Waffle House is one of several “world-class examples in their disaster management and humanitarian response planning approaches.”

His academic paper, “The ‘Waffle House’ Emergency Level Index,” detailed the challenges faced by businesses, including Wal-Mart, Lowe’s and Home Depot, that provide key services to a recovering community.

“Predicting customer demand after a disaster event, providing product required to the affected stores in an accurate and timely manner, establishing appropriate and ethical prices for their products, and maintaining adequate work-force levels after the event” are all part of an ironclad recovery plan.

Waffle House knows its customer demand will be high when scores of homes lose power to keep and cook food. Their employees’ commitment to serve those customers helps take care of the rest.

“We’ve been a 24-hour restaurant since 1955. We’re open on the holidays, on weekends and nights. So for us to close down is kind of against what we do.”
— Pat Warner, vice president of culture, Waffle House

The Waffle House Way

“[Our associates] know that their neighbors are going to be hungry, and opening the restaurant is their way to pitch in and get the community back on its feet,” Warner said. In addition to employee altruism, he credited the company’s dedication to quick recovery to its history as an around-the-clock restaurant.

“We’ve been a 24-hour restaurant since 1955. We’re open on the holidays, on weekends and nights,” he said. “So for us to close down is kind of against what we do. And our folks who run the restaurants really know that because they see their customers every day, and we’re fortunate enough to have regulars who come in sometimes more than once a day.”

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Even associates from restaurants hundreds of miles outside of affected areas have been known call the corporate office offering to send relief workers. Warner said the company takes on crisis recovery with a “family approach.”

But if employees’ desire to pitch in and restore their community is like the gas that fuels a car, executive leadership and proactive planning are the steering wheel and tires.

Waffle House has no dedicated response team; the executive vice president of a region where a store has been hit heads up recovery, according to Warner, by overseeing delivery of emergency supplies and determining the availability of workers in the area.

Dedicated teams lend support from corporate headquarters in Norcross, Ga., sending in construction teams and a mobile communications RV, which keeps workers in the field connected to a “situation room” back at the office. At the end of the day, though, “the folks in the field are the ones calling the shots,” Warner said.

Though they reach as far west as Phoenix and as far north as towns in Ohio and Pennsylvania, Waffle House’s nearly 1,700 restaurants are clustered heavily in the Southeast. They are, therefore, particularly susceptible to hurricane damage.

“We spend a lot of time with our suppliers in the off-season to ensure that they are ready when a hurricane hits,” Warner said. “Typically, they’ll have trucks loaded and ready to roll in right after the storm. That’s a key part of it, getting that safe food supply in because you really don’t know what you’ll have after the storm that’s local, and we wind up having to purge a lot of food.”

What Kouvelis dubbed as the gold standard of disaster response, then, seems to have no secret weapon. There is no superstar risk manager at the helm, no hidden stashes of backup generators or fresh water and supplies, nothing to incentivize employees’ swift actions other than the satisfaction of helping their hometown. The key to excellent crisis management is nothing more than swift execution of a simple but well-laid plan.

Planning Ahead

Devine of insureon compares this to athletes knowing how to react in different game situations.

“I coach hockey,” he said. “When the puck’s going 90 miles per hour and a 200-pound human being is skating at you at 20 miles per hour hitting you into the boards, if you don’t have a plan and know exactly what you’re going to do when the event happens, you’re [in trouble].”

Getting operational quickly happens when plans are executed immediately, not when plans are just  made when an event demands it.

Documenting and outlining all possible risks and exposures should be top priority for risk managers, Devine said. That lays the groundwork for developing a plan of action.

“That means thinking through your insurance covers and making sure you have all the business interruption and contingent business interruption policies in place, both for yourself and your supply chain,” he said.

Then come the non-insurance-related courses of action. How will employees be contacted? How will customers be notified of the business’s status? Where will backup supplies like a generator come from? Has the facility been weather-proofed? How will the IT platform be managed? Having the pieces aligned brings the puzzle together much more quickly when the worst happens, he said.

David Cox, president of Arby’s supply chain co-op ARCOP, said risk can be mitigated by considering the proximity of suppliers and distributors. When an event knocks out a link in the chain, a backup plan should be quick and easy to set in motion.

“Some of our distributors have three or four distribution centers, so it would be easy for them to figure out a plan to get product to those stores that are serviced out of a damaged center,” Cox said. “Where we have single distribution centers, there are competing centers close enough that would pick up the slack.”

Restaurant owners and risk managers should also list key items that make up a good chunk of their menu and have two suppliers for each of those ingredients or products. Especially in a disaster, knowing where to get water and ice is crucial.

According to Cox, Arby’s will have refrigerated trucks packed with product situated just outside of forecasted storm areas, waiting to move in when the hurricane passes. If electricity is down, they will station those trucks in the restaurant parking lot so workers can continually withdraw fresh food until their own freezers get power again.

Some of these preparatory steps only apply, though, in the case of hurricanes.

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Weather forecasters can predict with a high degree of accuracy when and where a hurricane will make landfall, what path it will take and how intense the winds and rain will be. That gives businesses time to prepare their facilities and contact their suppliers.

Tornadoes are a different story. The current average lead-time for tornado warnings is 13 minutes, according to the National Oceanic and Atmospheric Administration. Barely enough time to take cover, let alone call for backup.

Tornado recovery is inherently reactionary, but the upside is that twisters cause damage on a much smaller scale than hurricanes, allowing for greater focus of resources. It also means more people are available to help, without their own devastation to deal with.

Some companies rely on simple, good-willed help more than others.

Devine’s clients, for example, are small businesses with tighter budgets and limited resources. They depend entirely on local support and loyalty to thrive.

“If the small businesses can get operational quickly, they can actually make the community a better place more quickly,” he said. When nearly 40 percent of small businesses fail to reopen after a disaster, however, that’s a formidable challenge.

With more than 1,000 locations, Waffle House is hardly small. But the warm atmosphere of Southern hospitality each outpost strives to create may make it feel like it is.

As the Waffle House Index evinces, the restaurant chain has certainly carved itself a niche as a community mainstay, fitting into the unique fabric of each town it serves. Perhaps it’s that combination of big business leadership and resources, and small business customer and employee loyalty that makes its recovery efforts so effective.

“As a company we’re very flattered by the Waffle House Index,” Warner said. “It shows that our hard work is being noticed. When the emergency response people are looking to you, you know you’re doing something right.”

Katie Dwyer is an associate editor at Risk & Insurance®. She can be reached at [email protected]

More from Risk & Insurance

More from Risk & Insurance

2018 Most Dangerous Emerging Risks

Emerging Multipliers

It’s not that these risks are new; it’s that they’re coming at you at a volume and rate you never imagined before.
By: | April 9, 2018 • 3 min read

Underwriters have plenty to worry about, but there is one word that perhaps rattles them more than any other word. That word is aggregation.

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Aggregation, in the transferred or covered risk usage, represents the multiplying potential of a risk. For examples, we can look back to the asbestos claims that did so much damage to Lloyds’ of London names and syndicates in the mid-1990s.

More recently, underwriters expressed fears about the aggregation of risk from lawsuits by football players at various levels of the sport. Players, from Pee Wee on up to the NFL, claim to have suffered irreversible brain damage from hits to the head.

That risk scenario has yet to fully play out — it will be decades in doing so — but it is already producing claims in the billions.

This year’s edition of our national-award winning coverage of the Most Dangerous Emerging Risks focuses on risks that have always existed. The emergent — and more dangerous — piece to the puzzle is that these risks are now super-charged with risk multipliers.

Take reputational risk, for example. Businesses and individuals that were sharply managed have always protected their reputations fiercely. In days past, a lapse in ethics or morals could be extremely damaging to one’s reputation, but it might take days, weeks, even years of work by newspaper reporters, idle gossips or political enemies to dig it out and make it public.

Brand new technologies, brand new commercial covers. It all works well; until it doesn’t.

These days, the speed at which Internet connectedness and social media can spread information makes reputational risk an existential threat. Information that can stop a glittering career dead in its tracks can be shared by millions with a casual, thoughtless tap or swipe on their smartphones.

Aggregation of uninsured risk is another area of focus of our Most Dangerous Emerging Risks (MDER) coverage.

The beauty of the insurance model is that the business expands to cover personal and commercial risks as the world expands. The more cars on the planet, the more car insurance to sell.

The more people, the more life insurance. Brand new technologies, brand new commercial covers. It all works well; until it doesn’t.

As Risk & Insurance® associate editor Michelle Kerr and her sources point out, growing populations and rising property values, combined with an increase in high-severity catastrophes, threaten to push the insurance coverage gap to critical levels.

This aggregation of uninsured value got a recent proof in CAT-filled 2017. The global tally for natural disaster losses in 2017 was $330 billion; 60 percent of it was uninsured.

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This uninsured gap threatens to place unsustainable pressure on public resources and hamstring society’s ability to respond to natural disasters, which show no sign of slowing down or tempering.

A related threat, the combination of a failing infrastructure and increasing storm severity, marks our third MDER. This MDER looks at the largely uninsurable risk of business interruption that results not from damage to your property or your suppliers’ property, but to publicly maintained infrastructure that provides ingress and egress to your property. It’s a danger coming into shape more and more frequently.

As always, our goal in writing about these threats is not to engage in fear mongering. It’s to initiate and expand a dialogue that can hopefully result in better planning and mitigation, saving the lives and limbs of businesses here and around the world.

2018 Most Dangerous Emerging Risks

Critical Coverage Gap

Growing populations and rising property values, combined with an increase in high-severity catastrophes, are pushing the insurance protection gap to a critical level.

Climate Change as a Business Interruption Multiplier

Crumbling roads and bridges isolate companies and trigger business interruption losses.

 

Reputation’s Existential Threat

Social media — the very tool used to connect people in an instant — can threaten a business’s reputation just as quickly.

 

AI as a Risk Multiplier

AI has potential, but it comes with risks. Mitigating these risks helps insurers and insureds alike, enabling advances in almost every field.

 

Dan Reynolds is editor-in-chief of Risk & Insurance. He can be reached at [email protected]