Foodborne illness has been on many investors' minds this winter. Chipotle Mexican Grill (NYSE:CMG) already had its hands full with the fallout from the highly publicized outbreak of E. coli, but its troubles were exacerbated by news of a far more common foodborne illness: norovirus. Buffalo Wild Wings (NASDAQ:BWLD) shares also took a hit last week when one location was linked to the same nasty bug.
E. coli sneaking through the supply chain is a serious and complicated issue, and it's crucial that Chipotle (and the industry at large) tackle it. However, norovirus is far more commonplace and contagious, and can hit any restaurant at any time. There's one pretty common-sense and simple way to reduce incidences considerably: Have ill workers stay home. But to make that the norm, the restaurant industry needs to embrace the paid sick-leave benefit.
Restaurants' generally stingy employee-treatment strategies may reduce their costs in the near term. But who's paying the price? It's arguable they're playing fast and loose not only with the health and well-being of their own employees, but their customers, too. Skimping on the sick-leave benefit is more costly to more people than we might imagine.
An insidiously well-traveled bug
According to the Centers for Disease Control (CDC), norovirus is the leading cause of illness and outbreaks from food in the United States. This little bug packs a big punch. It's tiny, highly contagious, and, according to the CDC, it takes as few as 18 virus particles to infect an unfortunate victim.
Norovirus reared its ugly head at Chipotle in December, when Massachusetts state health officials deemed the virus responsible for the illnesses of 141 Boston College students. The company also has to contend with a criminal probe regarding a separate outbreak in California. The company has said norovirus was spread through workers who came into work while sick.
The recent Buffalo Wild Wings situation relates to one Kansas location, with one confirmed case among many reports of the illness. It's worthwhile to note that norovirus seems to be aggressively making the rounds in that neighborhood, though. For example, as of this writing, the University of Kansas Hospital was linked to more cases, too, and a dinner theater had also been implicated.
Neighborhood outbreaks are the point, though, and here's some additional perspective: The CDC estimates that, every year on average, norovirus causes 19 million to 21 million cases of acute gastroenteritis. That's a heck of a lot of stricken people. The Chipotle and Buffalo Wild Wings incidents are just a drop in the bucket of norovirus's miserable and pervasive reach.
Granted, most of the time when we catch this bug we experience a violently unpleasant illness that passes relatively quickly. But take it from someone who's had it: You don't forget it anytime soon.
Although it's often a quick and dirty illness, it still annually results in 1.7 million to 1.9 million outpatient visits, and 400,000 emergency visits, usually comprised of young children. Speaking of age groups, the very young and very old are often most susceptible to illness, and that applies to norovirus, too. This virus contributes to approximately 56,000 to 71,000 hospitalizations, and 570 to 800 deaths each year.
The CDC attributes most outbreaks to food-service settings like restaurants, and points to infected workers as "frequently" the source.
Given the sheer numbers of sufferers, lost productivity, healthcare treatment, and occasionally very serious complications, we're looking at some pretty major human and economic implications beyond restaurants' short-term bottom lines.
Carrying on, carrying illness
Many investors may simply see illnesses like norovirus as a remote risk to their food-service stocks, and hold their collective breaths, hoping their companies never get implicated in highly publicized outbreaks. (Given the sheer number of cases every year, many are not so highly publicized.) Although the argument is that paid sick leave is too costly for many in the industry to bear, investors might want to consider the idea that it is a problem the industry should work hard to solve.
Caring about the health of your employees -- and in retail and restaurant industries' cases, they're your front line -- should be reason enough. Furthermore, though, restaurants should exist for their customers, not to extract as much profit and value from as many people as possible (including those whose patronage pays the bills and generates the profit).
Some might put the onus on the restaurant workers, but let's look at this realistically. They are typically low-paid. It stands to reason that they're unlikely to take unpaid leave when they're sick -- and especially if they're recovering, and well enough to be mobile. Many simply can't afford the financial hit if they're trying to make ends meet.
I think one of the key points here is "recovering." In norovirus's case, the CDC recommends that people avoid preparing food for others for 48 hours after symptoms stop. In other words, sufferers may feel better, but they're still potentially contagious. That's exactly how this tenacious, insidious virus gets around.
Research backs up the idea that many restaurant employees avoid calling in sick. According to a survey commissioned by Alchemy, 51% of food workers reported "always" or "frequently" going to work sick. Also consider that another 38% reported going to work while sick "sometimes."
This may sound like these workers are callous about customers, but nine out of 10 reported they do feel as if they're responsible for customers' safety and well-being. However, 45% give a non-surprising reason they don't skip work when they're ill: They "can't afford to lose pay." To be fair, another element comes into play, too: 46% "don't want to let coworkers down."
Fostering infectious health and happiness
Removing the financial incentive to go to work sick is beneficial for everyone. The only acceptable infectiousness should be customer service enthusiasm.
In a fresh move, Chipotle this week closed all its restaurants for several hours for a companywide meeting to communicate with its employees about food-safety issues and allow questions. Getting as many employees as possible on the same page provides an extra layer of protection.
Last July, before the foodborne illness controversy, Chipotle announced enhanced benefits to its employees, including part-timers, like paid sick and vacation time, and tuition reimbursement -- unusual perks in the industry at large. At the meeting Monday, Chipotle announced what is sure to be an industry-shaking new policy. Employees should now take sick leave for 5 days after symptoms end -- and this leave will be paid leave.
This may be viewed by some Chipotle investors as a far too onerous and expensive policy. Shareholders who have a truly long-term view should applaud the fact that Chipotle takes its earlier vow to get far ahead of the industry in health and safety seriously. These days, consumers don't want platitudes, they want honesty and action.
Still, the industry's resistance to keep employees' paychecks whole when they've been sick is a shame. Meanwhile, rumblings about paid sick-leave laws is risky business for those who resist. It's always better for companies to voluntarily plan ahead than wait for lawmakers to force them to do what popular opinion simply considers the responsible thing.
If the industry embraces paid sick-leave benefits, not only could restaurant stocks reduce that potential for risk to their reputations and brands, but they also could become stronger in serving their customers and reducing dangerous and costly health ramifications in the economy at large. In other words, it would be great news for everyone.