Fast casual burrito giant Chipotle (NYSE: CMG) was struggling with outbreaks that prompted a temporary closure of all of its U.S. stores and led to negative headlines across the country.
The year was 2015, and the culprit was a string of foodborne illnesses caused by E. coli, salmonella and norovirus that ultimately sickened 1,100 people in the years that followed. That period led to a crisis for the company, and damaged its reputation in the eyes of consumers. But only a few years later, Chipotle is on firmer footing thanks to a turnaround plan centered on transparency about its ingredients and processes, and on listening to the desires of its customers.
William Espey was there. He helped grow the company’s brand and develop its voice as a creative director and brand voice lead for nine years until 2018. Though Covid-19 is a problem of much greater magnitude than what Chipotle faced in 2015, Espey believes there are some lessons that senior living providers can learn from the burrito purveyor’s road to recovery.
“You can set a standard for transparency and procedure that simply didn’t exist before,” Espey said, as moderator of an Argentum webinar Thursday. “There’s an opportunity to become more through this, and I think better through this.”
No doubt, the senior living industry has sustained some damage to its reputation, and faces a long road to recovery in 2021. But the leaders behind three large operators — Brandywine Living, Discovery Senior Living and Eclipse — think the industry has an opportunity to distinguish itself in the eyes of prospective customers, similar to what Chipotle did in the aftermath of its crisis.
“We’ve got great opportunities to talk about how well we’ve done in extremely difficult circumstances,” said Brandywine President and CEO Brenda Bacon during the webinar. “We know there’s going to be change, and we just have to figure out as an industry how to take advantage and when to change.”
The Covid-19 vaccine and rollout provide a crossroads for the senior living industry, according to Richard Hutchinson, CEO of Discovery Senior Living.
“We’re at an inflection point, and that inflection can be good or bad depending on what we make it,” Hutchinson said Thursday during the webinar. “I think we can talk about all the outcomes, but also, I think there is some education that needs to happen with our consumer.”
Chipotle worked to regain the trust of its customers by giving them a window into the business. The company quickly realized it needed to provide more training for its employees, something that was complicated by turnover, according to Espey.
So, Chipotle closed all of its stores for an entire day in early 2016 to go over food safety with its employees. The company also gave out about 3 million free burritos. Then, in 2018, Chipotle launched an ad campaign showing its ingredients were “For Real.”
“That betrayal of trust [in 2016] took, arguably, about two years to really come out of that slump, and it ended up changing the restaurant and company completely,” Espey said.
Hutchinson doesn’t think providers have lost trust in the eyes of existing residents or their families — if anything, the industry has become more trustworthy in their eyes as a result of the care it has provided over the past year, he said. But he does believe the industry must work to translate that idea to prospective residents, too.
“We have to … make sure they can see and understand and feel that trust that we’ve developed over these last 12 months with our existing residents and their families, and then feel confident that trusting relationship will be imparted on them,” Hutchinson said.
Eclipse CEO Kai Hsiao agreed, and added that the pandemic presents an opportunity for the senior living industry to “level up” with regard to aid and recognition, and how it works with policymakers.
“If you take a look at the restaurant industry, if you take a look at even the similar skilled nursing industry, government aid was quick to come there, and I think for us, it took a little bit longer,” Hsiao said. “If we want to be at the table quickly and be understood quickly, the focus and the energy and the resources that other industries commit to public policy, we are going to have to increase to that level, as well.”
To its credit, the senior living industry has gotten much better about being transparent in the past year, Bacon said. At the beginning of the pandemic, some providers were reluctant to share even one positive case of Covid-19 for fear of a hit to sales or bad press. But now, the industry is tracking and reporting information on positive cases, deaths and vaccines every day — and transparency is a practice that is here to stay, she added.
“Our effort to try to be invisible to the federal government … I think we paid a big cost for that,” Bacon said. “We’ve got a unique product, we’ve got a great story to tell, we saved a lot of lives, and we need to be front and center about that and very much on their radar.”
The year ahead
Looking ahead to 2021, all three executives agreed there will be chances for the industry to rebuild occupancy and begin to rebound.
Discovery has made it its goal to return to 2019 occupancy levels in 2022 through a program the company has dubbed “Full Circle.” Already, Hutchinson sees demand among consumers picking up, and some Discovery communities have even seen gains in occupancy, year over year.
Hutchinson is also confident that there is some pent-up demand waiting for senior living communities. He points to the fact that, last October as some communities eased restrictions, Discovery saw its highest level of independent living move-ins in 24 months, including before the pandemic.
“I think there is a demand for that socialization,” he said. “I think that social aspect is going to drive demand, especially on the independent living side.”
Hsiao believes the industry might still have a rough few months ahead, especially if Covid-19’s new genetic variants take hold before vaccines are administered across the country. He also thinks it may take some time for the industry to recover from its “PR black eye” from last year, and that delayed or deferred CapEx projects might complicate the timing of the recovery. And then there is also the human and emotional toll of the pandemic, which won’t be easy to surmount.
“There are a lot of variables that are still in play to get a better understanding of when that recovery is going to come,” Hsiao said.
Like Discovery, Brandywine has also seen promising early signs of recovery. The company saw a “huge pickup” in leads and sales in January of this year, Bacon said.
“But one month does not a trend make, and we’ve got a long way to go,” she added.
Still, Bacon is optimistic about the fact that senior living is still a need-driven business, and believes there is pent-up demand waiting on the other side of the pandemic — as long as, like Chipotle, providers can make their case with prospects.
“We need to aggressively address the market,” Bacon said. “We’ve got the demographics as a positive, and I think we have a story to tell of how we conducted ourselves during this pandemic.”
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