In this segment from Market Foolery, host Chris Hill, Motley Fool Pro and Options' Jeff Fischer, and Motley Fool Options and Pro Canada's Jim Gillies slice up the ill will a single Jacksonville, Florida, Pizza Hut manager has generated for the brand after a memo to employees went viral. On the one hand, this image problem speaks to a bigger corporate choice made by Yum! Brands (NYSE:YUM) that contrasts markedly to what, for example, Starbucks has chosen. And on the other, it also speaks to the fine line employers have to walk when trying to boost their brands -- which this manager may well have been aiming for.
A full transcript follows the video.
This video was recorded on Sept. 12, 2017.
Chris Hill: Yum! Brands is putting the whole notion of "there's no such thing as bad publicity" to the test. Yum! Brands, parent company of Pizza Hut. Making the rounds on Twitter and in social media is a memo from a Pizza Hut manager in Jacksonville, Florida, who as Hurricane Irma was bearing down on Jacksonville, Florida, this manager put up a memo to all employees basically saying, "Hey, if you're going to evacuate because of this little Category 5 hurricane that's about to hit town, that's going to be considered time off."
Jeff Fischer: "Yeah, and we close the store typically six to 12 hours before the storm hits."
Jim Gillies: Because you know what I want before a hurricane destroys my home? I want a pizza.
Fischer: Yeah, there's so much that was wrong with this, starting with calling everyone "team members" in the note, and then kind of saying, "You're our slave who has to work here." You're not really a team member in that case. But where this is egg on Yum! Brands' face is, this is a franchisee. They don't own the store.
Hill: Right. This is not corporate policy.
Fischer: Right. And that's why you have to look to Starbucks, who has decided to own all of its own stores, and it can build a better brand over time because of that. This is one disadvantage of franchising your stores. I read the memo that the manager posted, and I think the intention was, and I'm going to take flak for this, maybe, was to provide service to customers in a way that was not disrupted unduly by the storm. It said, "You'll still have plenty of time to evacuate," and so and so. But it was extremely misguided and not well thought out.
Fischer: I don't know if the person is a bad person. I'm not going to assume that's the case. I think they meant to be the best manager they could be. But hopefully they'll never make this mistake again. But it also speaks to the power of social media now. We would have never heard about this even six or seven years ago, maybe. Ten years ago, definitely not. And now, giants even like Yum! Brands have to watch what every franchise does, because it can come back and bite them just like that.
Gillies: Yeah. It's this type of public shaming, we'll call it. It's been interesting. You saw another example with Hurricane Harvey a couple of weeks ago, with a megachurch preacher whose name escapes me --
Hill: Joel Osteen.
Gillies: Him, yes. He, I think, got taken to task on Twitter as well. Maybe it's Twitter's fault. I saw this morning that Yum! Brands was distancing themselves from this manager with the blowback. And again, I think Jeff is correct here -- this person probably didn't mean horrible things. They probably thought they were helping, probably thought they were offering good management at a time of crisis. But they're now probably going to experience their own time of crisis, because I don't think the corporation is going to have their back here, and they've already kind of distanced themselves, and this comes across as overmanaging.
Hill: And to bring it back full circle to Pizza Hut, there were managers of Pizza Hut franchises in Houston who were getting all kinds of credit because they were giving out free pizzas. There was one woman who was a manager of a Pizza Hut who's pregnant, and she was kayaking pizzas to people who were at shelters, and that kind of thing. So it's like, all this tremendous goodwill, and a lot of it has been given up as a result.
Chris Hill owns shares of SBUX. Jeff Fischer owns shares of SBUX. Jim Gillies owns shares of SBUX and has the following options: short October 2017 $57.50 calls on SBUX, long January 2019 $52.50 calls on SBUX, and short January 2019 $52.50 puts on SBUX. The Motley Fool owns shares of and recommends SBUX and TWTR. The Motley Fool has a disclosure policy.