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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

Cyber Resilience

No, Seriously. You Need a Comprehensive Cyber Incident Response Plan Before It’s Too Late.

Awareness of cyber risk is increasing, but some companies may be neglecting to prepare adequate response plans that could save them millions. 
By: | June 1, 2018 • 7 min read

To minimize the financial and reputational damage from a cyber attack, it is absolutely critical that businesses have a cyber incident response plan.

“Sadly, not all yet do,” said David Legassick, head of life sciences, tech and cyber, CNA Hardy.

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In the event of a breach, a company must be able to quickly identify and contain the problem, assess the level of impact, communicate internally and externally, recover where possible any lost data or functionality needed to resume business operations and act quickly to manage potential reputational risk.

This can only be achieved with help from the right external experts and the design and practice of a well-honed internal response.

The first step a company must take, said Legassick, is to understand its cyber exposures through asset identification, classification, risk assessment and protection measures, both technological and human.

According to Raf Sanchez, international breach response manager, Beazley, cyber-response plans should be flexible and applicable to a wide range of incidents, “not just a list of consecutive steps.”

They also should bring together key stakeholders and specify end goals.

Jason J. Hogg, CEO, Aon Cyber Solutions

With bad actors becoming increasingly sophisticated and often acting in groups, attack vectors can hit companies from multiple angles simultaneously, meaning a holistic approach is essential, agreed Jason J. Hogg, CEO, Aon Cyber Solutions.

“Collaboration is key — you have to take silos down and work in a cross-functional manner.”

This means assembling a response team including individuals from IT, legal, operations, risk management, HR, finance and the board — each of whom must be well drilled in their responsibilities in the event of a breach.

“You can’t pick your players on the day of the game,” said Hogg. “Response times are critical, so speed and timing are of the essence. You should also have a very clear communication plan to keep the CEO and board of directors informed of recommended courses of action and timing expectations.”

People on the incident response team must have sufficient technical skills and access to critical third parties to be able to make decisions and move to contain incidents fast. Knowledge of the company’s data and network topology is also key, said Legassick.

“Perhaps most important of all,” he added, “is to capture in detail how, when, where and why an incident occurred so there is a feedback loop that ensures each threat makes the cyber defense stronger.”

Cyber insurance can play a key role by providing a range of experts such as forensic analysts to help manage a cyber breach quickly and effectively (as well as PR and legal help). However, the learning process should begin before a breach occurs.

Practice Makes Perfect

“Any incident response plan is only as strong as the practice that goes into it,” explained Mike Peters, vice president, IT, RIMS — who also conducts stress testing through his firm Sentinel Cyber Defense Advisors.

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Unless companies have an ethical hacker or certified information security officer on board who can conduct sophisticated simulated attacks, Peters recommended they hire third-party experts to test their networks for weaknesses, remediate these issues and retest again for vulnerabilities that haven’t been patched or have newly appeared.

“You need to plan for every type of threat that’s out there,” he added.

Hogg agreed that bringing third parties in to conduct tests brings “fresh thinking, best practice and cross-pollination of learnings from testing plans across a multitude of industries and enterprises.”

“Collaboration is key — you have to take silos down and work in a cross-functional manner.” — Jason J. Hogg, CEO, Aon Cyber Solutions

Legassick added that companies should test their plans at least annually, updating procedures whenever there is a significant change in business activity, technology or location.

“As companies expand, cyber security is not always front of mind, but new operations and territories all expose a company to new risks.”

For smaller companies that might not have the resources or the expertise to develop an internal cyber response plan from whole cloth, some carriers offer their own cyber risk resources online.

Evan Fenaroli, an underwriting product manager with the Philadelphia Insurance Companies (PHLY), said his company hosts an eRiskHub, which gives PHLY clients a place to start looking for cyber event response answers.

That includes access to a pool of attorneys who can guide company executives in creating a plan.

“It’s something at the highest level that needs to be a priority,” Fenaroli said. For those just getting started, Fenaroli provided a checklist for consideration:

  • Purchase cyber insurance, read the policy and understand its notice requirements.
  • Work with an attorney to develop a cyber event response plan that you can customize to your business.
  • Identify stakeholders within the company who will own the plan and its execution.
  • Find outside forensics experts that the company can call in an emergency.
  • Identify a public relations expert who can be called in the case of an event that could be leaked to the press or otherwise become newsworthy.

“When all of these things fall into place, the outcome is far better in that there isn’t a panic,” said Fenaroli, who, like others, recommends the plan be tested at least annually.

Cyber’s Physical Threat

With the digital and physical worlds converging due to the rise of the Internet of Things, Hogg reminded companies: “You can’t just test in the virtual world — testing physical end-point security is critical too.”

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How that testing is communicated to underwriters should also be a key focus, said Rich DePiero, head of cyber, North America, Swiss Re Corporate Solutions.

Don’t just report on what went well; it’s far more believable for an underwriter to hear what didn’t go well, he said.

“If I hear a client say it is perfect and then I look at some of the results of the responses to breaches last year, there is a disconnect. Help us understand what you learned and what you worked out. You want things to fail during these incident response tests, because that is how we learn,” he explained.

“Bringing in these outside firms, detailing what they learned and defining roles and responsibilities in the event of an incident is really the best practice, and we are seeing more and more companies do that.”

Support from the Board

Good cyber protection is built around a combination of process, technology, learning and people. While not every cyber incident needs to be reported to the boardroom, senior management has a key role in creating a culture of planning and risk awareness.

David Legassick, head of life sciences, tech and cyber, CNA Hardy

“Cyber is a boardroom risk. If it is not taken seriously at boardroom level, you are more than likely to suffer a network breach,” Legassick said.

However, getting board buy-in or buy-in from the C-suite is not always easy.

“C-suite executives often put off testing crisis plans as they get in the way of the day job. The irony here is obvious given how disruptive an incident can be,” said Sanchez.

“The C-suite must demonstrate its support for incident response planning and that it expects staff at all levels of the organization to play their part in recovering from serious incidents.”

“What these people need from the board is support,” said Jill Salmon, New York-based vice president, head of cyber/tech/MPL, Berkshire Hathaway Specialty Insurance.

“I don’t know that the information security folks are looking for direction from the board as much as they are looking for support from a resources standpoint and a visibility standpoint.

“They’ve got to be aware of what they need and they need to have the money to be able to build it up to that level,” she said.

Without that support, according to Legassick, failure to empower and encourage the IT team to manage cyber threats holistically through integration with the rest of the organization, particularly risk managers, becomes a common mistake.

He also warned that “blame culture” can prevent staff from escalating problems to management in a timely manner.

Collaboration and Communication

Given that cyber incident response truly is a team effort, it is therefore essential that a culture of collaboration, preparation and practice is embedded from the top down.

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One of the biggest tripping points for companies — and an area that has done the most damage from a reputational perspective — is in how quickly and effectively the company communicates to the public in the aftermath of a cyber event.

Salmon said of all the cyber incident response plans she has seen, the companies that have impressed her most are those that have written mock press releases and rehearsed how they are going to respond to the media in the aftermath of an event.

“We have seen so many companies trip up in that regard,” she said. “There have been examples of companies taking too long and then not explaining why it took them so long. It’s like any other crisis — the way that you are communicating it to the public is really important.” &

Antony Ireland is a London-based financial journalist. He can be reached at [email protected] Dan Reynolds is editor-in-chief of Risk & Insurance. He can be reached at [email protected]