9B16C052
EARLS RESTAURANTS LTD.: THE IMPORTANCE OF A
COMMUNICATION PLAN
R. Chandrasekhar wrote this case under the supervision of Professor Mary Weil solely to provide material for class discussion. The
authors do not intend to illustrate either effective or ineffective handling of a managerial situation. The authors may have disguised
certain names and other identifying information to protect confidentiality.
This publication may not be transmitted, photocopied, digitized or otherwise reproduced in any form or by any means without the
permission of the copyright holder. Reproduction of this material is not covered under authorization by any reproduction rights
organization. To order copies or request permission to reproduce materials, contact Ivey Publishing, Ivey Business School, Western
University, London, Ontario, Canada, N6G 0N1; (t) 519.661.3208; (e) cases@ivey.ca; www.iveycases.com.
Copyright © 2017, Richard Ivey School of Business Foundation Version: 2017-01-06
It was Sunday, May 1, 2016. Mo Jessa, president of Earls Restaurants Ltd. (Earls), a Canadian chain of 66
restaurants headquartered in Vancouver, had just completed a series of conference calls. Only the
previous day, he had been at an annual company retreat in Palm Springs. (The retreat was an opportunity
for the company’s 13 operational heads, who were each responsible for four to six restaurants in the
chain, to spend time with the company’s president and with Stan Fuller, the chief executive officer and a
member of the chain’s founding family.) Now, Jessa had rushed back to the head office, where a
communications crisis that had been brewing since midweek required urgent strategic intervention.
Earls had issued a press release on April 27, announcing that, effective immediately, it would be serving
only “humane” beef raised without the use of “antibiotics, steroids or hormones” and designated as
“Certified Humane” by Humane Farm Animal Care, a U.S.-based organization. It had also sent out a
general tweet: “This is really big. Earls is the first chain in North America to source beef from Certified
Humane farms in all its restaurants.”
Within hours, reporters were gathering reactions from a cross-section of ranchers, consumers, and
industry peers. By evening, the news had gone national. The chair of Alberta Beef Producers appeared on
a national news channel to say that Earls was insinuating that Canadian ranchers were not raising their
animals humanely. “It’s a slap in the face,” he said, adding, “I am a producer and I am quite mad. If we
raised our cattle in an inhumane manner, we wouldn’t be in business.”1 The news soon went viral,
triggering negative publicity of a magnitude that took everyone at Earls by surprise.
The front-line servers, cooks, and hostesses at Earls restaurants, particularly in Alberta, were facing upset
customers. The phone at the head office was ringing almost continuously with calls from upset Albertans
and ranchers. The company’s social media stream was fired up. Said Jessa,
I have personally apprised the founding family members of the situation. I know their perspective
of the way forward. I have been on conference calls with our operational heads individually and
1 “Earls Switch to U.S. Meat ‘A Slap in the Face,’ Alberta Beef Producers Boss Says,” CBC News, April 28, 2016, accessed
August 12, 2016, www.cbc.ca/news/canada/calgary/earls-cattlemens-association-humane-beef-alberta-1.3557523.
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have a sense of what they think Earls should do. I have received inputs from my senior
management team at the head office and know where they stand. I have met with a cross-section
of employees at the head office. I have also spoken to an external consultant. It all narrows down
to three alternatives. The first is to do nothing; we will simply ride over the situation which,
sooner or later, will pass. The second is to revert to buying conventionally raised beef locally; we
will make amends with the Canadian beef industry and move on. The third is to stick to what is
right since, as a company, we believe in humane beef, raised without the use of hormones and
antibiotics. The call is now mine to make as the president.2
CANADIAN RESTAURANT INDUSTRY
The Canadian restaurant industry had revenues of $75 billion3 in 2015 (see Exhibit 1). Growing at about
2 per cent per annum, it represented nearly 4 per cent of the Canadian economy. As the fourth-largest
private-sector employer in Canada, its 91,250 units provided jobs to 1.2 million people. Nearly one in five
jobs for Canadian youth between the ages 15 and 24 was in the restaurant industry.4 Said Jessa,
The restaurant industry is where 20 per cent of Canadians land their all-important first job.
Working in a restaurant is motivating because customers generally visit a restaurant to socialize
with family and friends and enjoy a meal; they are predisposed to having a good time. It enables
young workers to acquire skills that are transferable to other jobs, like passion for work and
customer orientation. Food service is also a business that is part of the entrepreneurial dreams of
many young Canadians.
A major trend in the Canadian restaurant industry, as elsewhere in the world, was the growing influence
of consumers in the 18–34 age group. Known as Millennials, this group formed 36.8 per cent of the
Canadian workforce.5
Millennials’ perspectives on food differed from those of their predecessors, Gen Xers (in the age group of
35–51 years) and baby boomers (in the age group of 52–80 years). Millennials were concerned about the
origins of food. Sustainability was a major issue for them. They did not favour the use of pesticides,
antibiotics, and growth hormones during plant and animal breeding.
Beef Consumption
The United States was the world’s largest consumer of beef. In 2015, U.S. beef consumption was 11.29
billion tons, equivalent to 19.9 per cent of global consumption. In Canada, by contrast, it was 925 million
tons in 2015. There had been a gradual decline in per capita beef consumption in Canada, from about
37 kilograms in 1984 to 27.5 kilograms in 2012. The decline was the result of four factors: an aging
population was inclined to eat less beef; the country’s main source of immigrants was changing from
Europe to Asia; Canadians, including the millennial generation, were increasingly concerned over their
health; and beef prices had increased 157 per cent during the period 1984–2012.
2 Mo Jessa, interview with case author, July 11, 2016. All subsequent quotes from company executives are based on
personal interviews.
3 All currency amounts are in Canadian dollars unless specified otherwise.
4 Restaurants Canada, Restaurant Industry Factbook 2015, 2015, accessed September 1, 2016,
www.restaurantscanada.org/wp-content/uploads/2016/07/RC_PocketFacts_15_EN_FINAL .
5 Graham F. Scott, “Millennials Are Now the Biggest Generation in the Canadian Workforce,” Canadian Business, June 3,
2015, accessed August 15, 2016, www.canadianbusiness.com/innovation/the-millennial-majority-workforce/.
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A fall in domestic consumption had, however, opened up opportunities for export. The United States was
the largest export market, accounting for 73 per cent of total Canadian beef exports in 2014.6
The beef industry value chain had four stages (see Exhibit 2). The first stage consisted of assembling the
inputs required to raise cattle such as feed, veterinary services, and seed stock. The second stage consisted
of raising the cattle. Three different types of farmers were involved at this stage, often in different
locations: those rearing calves up to seven to eight months; those adding weight to cattle with pasture,
range, and forage; and those feeding them high-energy grains to bring them to what was called “slaughter
weight”—about 590 kilograms (1,300 pounds) each. The third stage consisted of slaughtering,
processing, and packing—which were all done at multiple locations—and then distribution by
wholesalers. Those in the final stage, such as retailers and restaurants, were traditionally involved only at
the third and final step of this stage, distribution.7
Claudia Vorlaufer, the vice-president of procurement and logistics at Earls, explained:
The wholesalers are the only link in the entire value chain to customers. It is typical of all
categories we source at Earls. It is very rare for a national restaurant chain with centralized
purchasing to have direct relationships with vegetable farmers, wheat growers, cheese makers, or
ranchers. They would only deal with wholesalers having the finished product ready for sale. They
would never go beyond that level.
A major issue in the beef industry was that cows raised in commercial farms were getting bigger in size.
They were 25 per cent bigger in 2015 than they were 10 years prior. The growth was not due to evolution
but due to hormones. The mindset of the ranchers was that heavier animals would have greater muscle
mass and produce higher market returns. However, just as in humans, body mass was not good for the
cows because it caused their knees and hips to become weak. More muscle also meant less marbling
within the meat. It was the marbling that provided the flavour and tenderness. Marbling came from the
feed, like barley and corn, not from growth hormones. But the industry had a stake in animal mass
because it was directly proportional to revenue.
EARLS: OVERVIEW
Earls was set up in 1982 in Edmonton, Alberta, by a father and son duo, Leroy Earl Fuller and Stanley
Earl Fuller. Conceived as a “fun place to hang out,” it offered burgers and draught beer at reasonable
prices. Value for money (VFM), its main proposition, was in tune with the economic slowdown of the
time. Over time, Albertans claimed Earls as one of their own because the chain was founded in Alberta.
By 2016, Alberta had 26 locations and was the province with the largest number of Earls restaurants.
The father and son duo had started with some business basics in mind, which evolved to become the
company’s core principles and served as reference points in critical moments. They had remained stable,
even as the restaurant industry was changing and Earls itself was transforming into a national chain.
For example, Earls would hire youngsters without working experience who were new to the restaurant
industry. There would be no lateral recruitment. All hires would start at the bottom—in the kitchen, bar,
6 Farm Credit Canada, The 2015 Beef Sector Report, 5, 2015, accessed November 9, 2016, www.fcc-fac.ca/fcc/about-
fcc/corporate-profile/reports/beef-sector/beef-sector-report-2015 .
7 Marcy Lowe and Gary Gereffi, A Value Chain Analysis of the U.S. Beef and Dairy Industries (Durham, NC: Center on
Globalization, Governance & Competitiveness, Duke University, 2009), 14, accessed August 15, 2016,
www.cggc.duke.edu/environment/valuechainanalysis/CGGC_BeefDairyReport_2-16-09 .
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or dining room—and move upwards, often very quickly. Working from the lowest level was a
prerequisite for all positions. Employees were allowed to make mistakes and learn from them. The
objective was to promote a learning culture. An alert would go up only when the same mistake was
committed twice by the same employee. Everyone would own up to mistakes without hesitation and take
personal responsibility. All managers would train their subordinates, test them in new situations, and take
ownership for their growth within the organization. Earls would build a leadership pipeline of people
eager, willing, and ready to take over. It would regularly open restaurants in new locations so that the
expansion created new job opportunities within the company. Earls would be more of a people
development company than a food service company. Earls’s managers would not establish personal
territory; instead, they would be facilitators of seamless growth of the organization and its people. Earls
would be family owned, and the owners would be involved in strategic issues. But the company would be
professionally managed. Jessa explained:
Let me give you a sense of what those basics have meant to me personally. I applied for a part-
time job at Earls in the summer of 1988, when I was in my third year at university, studying
genetics. I wanted to be a bartender, which I thought would be cool, but I was given the job of a
dishwasher. I took it. One day, the equipment conked out. I went up to the sous chef and said,
“The dishwasher is broken.” He said, “So, what are you going to do about it?” I said, “It’s not my
problem, is it?” He said, “Okay, what would you do if your dishwasher was broken?” I said, “I
don’t know.” He said, “Well, there must be a tag on the machine saying who to call at the
company. Go find it, call them and get them to come in and fix it.” I looked for the tag, but I
couldn’t find it. I went back to the chef and said, “Listen man, there is no tag in there.” And he
asked me again, “Well, what would you do if it was yours?” I said, “I don’t know.” He said, “Go
look in the yellow pages. You might find someone there.” To cut a long story short, I fixed it
during the day on my own. I also learned very quickly that, even though I was only an employee,
this was my business. I could take charge at the first sign of trouble. I had autonomy. That was
my first taste of the Earls culture. In fact, one of the core beliefs at Earls is: “It is my business.” It
is instilled early on.
Several activities were centralized at Earls. Purchase of raw materials, for example, was coordinated for
the entire chain from the head office. Quality, consistency, logistics, and pricing could be managed better
through consolidation. Customer relationship management was also monitored from the head office. Earls
had an online guest feedback system that received an average of 20 reactions per day. Meal service
generally attracted the largest number of reactions. Each was relayed to the individual restaurant for
follow-up and action, which was communicated to the head office within a 24-hour response time.
Culinary development was also centralized at a test kitchen in Vancouver.
Every Friday, a group of seven people—the president, executive chef, culinary development chef, vice-
president of marketing, vice-president of procurement, and a server and a cook drawn by rotation—would
get together at the test kitchen to sample a new recipe or product that had not been received well in the
chain by customers. Taste was invariably the final arbiter of whether a particular product should remain in
the portfolio or be replaced. Three times a year, the chain’s far-flung operational leaders and regional
chefs gathered in Vancouver to test, finesse, and ultimately decide which new dishes (known internally as
“creatives”) could be scheduled for launch on the next seasonal menu.
Said Joanne Fry, receptionist at the head office:
There is an openness at Earls which is palpable to even a casual visitor. For example, on a Friday
afternoon each month, we all assemble at the office kitchen. Everyone brings their own food. We
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get updates on what is happening in the business. The president and the heads of various
functions and businesses take turns to brief us on important changes for the month. Sometimes,
there is no particular agenda. But they all come. It helps everyone know what is going on. It
preempts formation of silos, which is an issue in organizations.
Earls had moved, over time, from a VFM proposition to what it called “affordable luxury.” This meant it
offered a combination of the best in quality at the best of prices. Earls was not compromising on its
promise of providing, in the restaurant’s terminology, “soulfully premium” food. The approach imposed
its own discipline on internal operations, including materials sourcing. For example, Earls would buy the
best olive oil, not on the basis of brand, but on the basis of the taste it delivered. It did not matter if it was
a low-cost private label.
Conscious Sourcing
It was in 2013, in his first full year as president that the idea of conscious sourcing surfaced in Jessa’s
mind. In one of his routine meetings with the family, the founders told him, “Go make Earls a restaurant
that the next generation loves as much as their parents [do].” This concept was new for Jessa. He looked
around for precedents, and there were none in the restaurant business. It was common in the luxury sector,
however. Louis Vuitton was a ready example of a company that was liked equally by successive
generations of customers.
Jessa then started looking at the eating habits of consumers forming the next generation. He saw that, in
the next 20 years, 80 per cent of the world would be urbanized. People would “live in smaller and smaller
spaces where they just have a microwave oven and a toaster. In the future, people won’t be able to cook,
so restaurants have a responsibility to fill the gap.”8 Quality of food would be one of the biggest drivers in
restaurant choice. Quality would have several dimensions: antibiotic-free, hormone-free, and steroid-free
raw materials; clean, healthy, fresh, and local ingredients; smaller carbon footprint; transparency about
supply chain; and humane treatment of animals on the farms.
The 6.3 million Millennials in Canada were a distinctive group. This single largest demographic cohort
was made up of people who were on the way to their prime working and spending years. A report by
Morgan Stanley in early 2015 showed that consumers under the age of 35 were already eating out more
often than their parents, but their dining habits were different. Fifty-three per cent of them went out to eat
once a week, compared with 43 per cent of the general population. They were also more likely than their
parents to patronize eateries with good social ethics, which explained the popularity of socially
progressive brands like Starbucks. The report also said that, while Millennials also frequented quick-
service restaurants like McDonalds, they were too embarrassed to talk about them with peers. Their
measurements for healthy food were different. “Fresh, less processed and fewer artificial ingredients”
mattered more to this group than calorie counts.9
Earls also did some internal research. Most of its own employees were between 19 and 26 years old, so
company managers started asking them questions like, “What kind of food do you like?” The common
response was, “Food with integrity.” This meant that Earls should buy animal proteins from companies
8 Sabrina Maddeaux, “Are Chain Restaurants Successfully Moving Toward Authentic Innovation or Still Uncool Relics of the
’90s?” National Post, July 7, 2016, accessed July 17, 2016, http://news.nationalpost.com/life/food-drink/are-chain-
restaurants-successfully-moving-toward-authentic-innovation-or-still-uncool-relics-of-the-90s.
9 John Glass, Jake Bartlett, and Courtney O’Brien, Restaurants—Alpha Wise Survey: What Millennials Want, Morgan
Stanley Research, March 24, 2015, accessed July 20, 2016,
http://static.ow.ly/docs/Millennials%20Morgan%20Stanley_3r3Z .
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that complied with animal welfare standards and raised their animals without chemicals or hormones. The
general consensus was that Earls should start sourcing animal proteins with those attributes.
Earls purchased beef in the largest volumes, at nearly 590 tons (1.3 million pounds) yearly, so it could be
a good starting point. Beef was being bought from wholesalers in Alberta, who, in turn, sourced it from
Albertan ranchers. The first reaction of Dave Bursey, chief protein buyer, was that it was unlikely that the
“new” beef could be sourced within Canada, where Angus beef, originally from Scotland, ruled among
local ranchers. Jessa had a solution: Earls could do a phased launch, depending upon availability, one
restaurant at a time. A phased launch would also be an opportunity to test whether the more humane beef
would sell in the restaurant.
In his search for ranches raising what he considered “happy” animals—animals raised without antibiotics,
added hormones, or steroids; treated with respect on the farm; and given access to clean water and lots of
room to move around—Bursey came across two small producers in Alberta: Aspen Ridge Farms and
Beretta Farms. They were selling their output to large grocery retailers in Canada and also exporting to
the United States. However, they were willing to divert limited stocks to Earls only occasionally, and the
product was costlier than Angus beef. Earls, therefore, decided to launch it on a trial basis. Executive
Chef Phil Gallagher explained:
We put Aspen Ridge steak on the menu of our Vancouver restaurant. Since the beef was
purchased at a higher price, we priced the steak at $27 per serving. We priced Angus steak, as
before, at $25 per serving. The initial data revealed that both were selling about equally.
Evidently, price was not an issue with our guests. But we wanted to be sure. We reduced the
portion size of Aspen Ridge steak to six ounces and priced it at $25 per serving, on par with
Angus beef, which had a higher portion size of seven ounces. Aspen outsold Angus by 30 per
cent. The takeaway was that, at a certain price point, consumers preferred smaller portions as long
as quality was higher. We thus had clear evidence in favour of conscious sourcing of beef. We
extended the consumer testing to our restaurants in Calgary and Winnipeg. The testing lasted for
two years at three locations. They all gave us the same results.
Jessa was quick to see an opportunity for differentiation in conscious sourcing. Earls could claim to be the
first in the Canadian restaurant industry to source humanely raised beef. But both Aspen Ridge Farms and
Beretta Farms had their order books full. They were in no position to cater to a full-scale launch of their
beef by Earls across its chain. As Bursey noted:
I was under pressure to deliver. In the spring of 2015, I was in London, [in the United Kingdom],
having steak at a restaurant. It was very tasty. I checked and found out the beef was sourced from
a ranch in Kansas . . . called Creekstone Farms. I was scheduled to attend the National Restaurant
[Association] show in Chicago within days. Staring at me as I walked through the door was the
logo for Creekstone beef. It was my first interaction with the company. Within an hour, we had it
set up for me to go to Kansas to visit their production and processing plants. The cows in the
ranch were being raised without antibiotics and hormones. They were, I noticed, happy.
Creekstone also followed a classification called “Certified Humane.” The compliance with animal
welfare standards was audited and certified by a third party, an American not-for-profit called
Humane Farm Animal Care. Creekstone had enough capacity to take care of our entire annual
requirement. I texted Jessa: “I’ve found a supplier!”
On April 22, 2016, Jessa recorded a 96-second video for release on YouTube on conscious sourcing. He
began by saying that Earls would “be the first restaurant chain in North America to serve certified
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Page 7 9B16C052
humane beef in all of its restaurants.”10 The statement gave no indication of what humane beef was and
where Earls would be sourcing it from. On April 26, the company put out a press release, carried by
television channels that evening and print media the next day, stating that, “effective April 27, 2016, all
66 Earls across North America will serve 100% Certified Humane® beef, making them the first restaurant
in North America, both U.S. and Canada, to do so.”11
Response from Customers and Ranchers
Among the first to notice a response was Miko Bryson, social media specialist at Earls. Having joined the
company in August 2006 as a server and bartender while still studying, she had moved into the newly
created role at head office, reporting to the vice-president of marketing, in January 2015. The role
involved tracking and often responding to comments about Earls on three social media channels:
Facebook, Twitter, and Instagram.
Twitter was the first to light up (see Exhibits 3 and 4) with both tweets and retweets. Posts related to beef
soon also appeared on Facebook, where Earls was posting regularly. On the eight posts created by Earls
on the Facebook page, there were 10,137 comments, 3,680 shares, and 18,168 reactions to the posts.
Bryson was finding it difficult to stay on top of the deluge. By the time she replied to a message and hit
the refresh button to move on, new comments had popped up. She found it exasperating. She also noticed
a trend: names were repetitive, and messages were being copied and pasted, which indicated an intent to
harass. It was a clear sign of trolling. “It was overwhelming,” she said. Many of the accounts were fake,
set up to badger Earls.
Fry was also handling inward calls as the receptionist. She was aware of the change in sourcing, but she
had no clue what was to hit her when she came to work on the morning of April 27. There were a dozen
voice mails waiting, all pertaining to beef. Callers were seemingly angry that the Earls’s supplier for
humane beef was not in Canada—more specifically, not in Alberta—but a U.S. company; they were
concerned about the perceived implication that Alberta beef was inferior or inhumane. She was taken
aback at their tone and called up the two members of the management team present in the office that day:
the vice-presidents of brand and marketing and of procurement. They asked her to forward the voice
mails and all future calls on the matter of beef to one of them. If both of them were on the phone, callers
should be requested to leave messages with an assurance that one of them would call back within a day.
The phone calls numbered over 300 that day. Fry took each call, either forwarding it to one of the vice-
presidents or assuring the caller that their call would be returned. She was shaken by the calls she took.
The callers seemed real, not fake. She also sensed that a majority of them had not visited an Earls
restaurant and were likely farmers and ranchers. “I understood they were upset,” she said, “but some of
them were getting personal. It was tough [to listen] to them and retain composure.” It lasted three days.
She was on the verge of a breakdown. When a particular caller said, however, that what Earls was doing
was right, she felt good, and that was when she finally broke down.
10 “Earls President Mo Jessa on Conscious Sourcing,” YouTube video, 1:35, posted by Earls Restaurants, April 22, 2016,
accessed July 30, 2016, www.youtube.com/watch?v=Sf-LSf0V3h4.
11 Earls Restaurants Ltd., “Now Serving 100% Certified Humane Beef ®,” news release, April 26, 2016, accessed August 10,
2016, https://earls.ca/news/now-serving-100-certified-humane-beef.
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Page 8 9B16C052
Company’s Response
As she walked into the office on April 27, Kristin Vekteris, vice-president of brand and marketing, was
gearing up for imminent media calls over the press release that had been issued the previous day. But she
was surprised to hear from both Fry and Bryson about the negative reactions over phone and social media
channels. She decided to field phone calls directly and through calling back. When Vorlaufer found that
the calls were piling up, she volunteered to step in. Speaking to the public was unfamiliar territory for her,
but she thought she could handle the conversations because a large number of the callers seemed to be
from her own constituency: the company’s supply chain.
Both vice-presidents listened to each caller without interrupting. Once the caller had let off steam, they
explained their rationale. They pointed out that the issue was not the quality of Canadian beef but the
quantity, and that there simply was not an adequate supply within Canada that would meet Earls’s annual
requirement. Both thought that the situation would blow over by the end of the week.
Television channels replayed interviews with ranchers and customers at regular intervals. Among these
was an interview with the chair of Alberta Beef Producers, who remarked that the switch to U.S. beef was
a “slap in the face.” The remark was widely circulated online. Realizing that misinformation was
circulating on social media in particular, Vekteris decided to provide clarification through an online post
(see Exhibit 5). She thought the tactical move would calm those who were concerned. But when loyal
customers started joining the discussion, she recognized the need for strategic intervention. This was
when she texted Jessa in Palm Springs to update him:
As I spoke to our loyal customers over the phone during those three days up to Friday, I sensed
the affection some of them had for the Earls brand. They considered Earls an extension of
themselves. They were upset because our decision to source beef from the United States did not
align with our Canadian, and more particularly Albertan, roots. That was a beacon of light amid
the chaos around us at the time. I thought we should hold on to it and somehow leverage it in
dealing with the ongoing situation.
On Saturday morning, the core team of Jessa, Bursey, Vekteris, and Gallagher held a conference call.
Vekteris said that it would be necessary to bring in a consultant for help in developing a communications
strategy. The consultant quickly identified the source of the problem: Earls had not spoken to or confided
in the ranching community. The first step in undoing the damage, she said, was to build bridges with this
group. Jessa joined Vekteris for a second call with the consultant the next day, where the consultant
reiterated her view that Earls should connect with the industry at the earliest opportunity.
DECISION
On Sunday, May 1, Jessa was in a position to weigh the alternatives before him. He had spoken to his
core team and heard their views on the way forward. He had been in conference calls with regional heads,
not only to apprise them of the situation but also get their feedback. He had input from an external
consultant, and he had reviewed the ongoing situation with members of the founding family.
Jessa had three broad alternatives from which to choose.
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Page 9 9B16C052
Do Nothing
This was a point of view expressed by a section of insiders. Their rationale was twofold: (1) the situation
would run its course in the media and, sooner or later, would be overtaken by other events; (2) any
publicity was good publicity, and Earls was gaining name recognition. There was also a view among
some of them that Earls was a family held enterprise that, unlike a listed company, did not have to face
public scrutiny over a business decision to switch to U.S. beef. In any case, the company had tried to
source from within Canada and had found no local suppliers.
On the other hand, the ongoing discussion in the media was affecting the reputation of Earls. If the
company did not react, its inaction would make the process of salvaging its reputation more difficult.
There would be a multiplier effect; the company would lose loyal customers, turn off potential customers,
and alienate large numbers of employees who had stayed at Earls because they believed in what the
company stood for. It would also affect the company’s relationships with suppliers of raw materials other
than beef, likely negatively.
Go Back to Domestic Sourcing
This would be a safe option, and it would guarantee peace with an important stakeholder: the ranchers. It
was true that Earls had not consulted with the ranching community. It had not gone beyond the
wholesalers in the value chain, and the company was clearly at fault here. It could now make amends by
going back to sourcing beef from within Canada. Reversing its stand would surely safeguard these long-
term business interests. Earls could still work with the ranchers to ensure the quality of Canadian beef was
on par with the U.S. standards.
However, this option would overlook the explicit concerns of the company’s consumers and employees.
There was very strong opposition from front-line employees, who had been at the receiving end of critical
comments from ranchers, in particular. They had felt bullied, and they did not want Earls to give in to the
pressure from ranchers. Doubling back was also seen as a move that would dilute the Earls brand.
Stick to What is Right
When he was on conference calls with heads of restaurants outside Vancouver, Jessa invariably asked,
“Do you think we’ve made a mistake?” There was a unanimous view that Earls had not made a mistake in
switching to humane beef. The only mistake was, perhaps, in not taking Canadian ranchers into its
confidence. This mistake could surely be undone by apologizing to the ranchers and using as much of the
small production of Canadian beef that met the company’s criteria, but Earls should not simply abandon
the idea it had pioneered.
However, this would not be easy. About 80 per cent of the cattle in Alberta was being farmed with
growth-enhancing hormones. It would take at least two years to get a new generation of cattle raised
without antibiotics and hormones and to get all the chain’s restaurants on Canadian beef.
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Page 10 9B16C052
EXHIBIT 1: CANADIAN RESTAURANT INDUSTRY—REVENUES BY SEGMENT
# Segment Revenues ($ millions)
2015 2014
A COMMERCIAL FOOD SERVICE: Operations whose primary business is food and beverage
service
1 Full-service restaurants: Licensed and unlicensed fine-
dining, casual, and family restaurants; restaurant-bars 25,813 24,916
2 Limited-service restaurants: Quick-service restaurants,
cafeterias, food courts, and take-out and delivery
establishments
26,532 25,536
3 Contract and social caterers: Contract caterers supplying
food services to airlines, and railways, institutions, and
recreational facilities; social caterers providing food
services for special events
5,085 4,904
4 Drinking places: Bars, taverns, pubs, cocktail lounges,
and nightclubs primarily engaged in serving alcoholic
beverages for immediate consumption. These
establishments may also provide limited foodservice.
2,312 2,296
TOTAL COMMERCIAL 59,742 57,652
B NON-COMMERCIAL FOOD SERVICE: Self-operated food service in establishments whose
primary business is something other than food and beverage service. Branded restaurants in
any of these settings are counted in commercial restaurant sales if they are owned by the
restaurant chain.
1 Accommodation food service: Food service in hotels,
motels and resorts 6,162 5,890
2 Other food service: Food service in hospitals, residential
care facilities, schools, prisons, factories, remote facilities,
and offices; includes patient and inmate meals; also
includes retail food service and all other food service
(vending, sports and private clubs, movie theatres,
stadiums, and other seasonal or entertainment operations)
8,665 8,307
TOTAL NON-COMMERCIAL 14,707 14,197
TOTAL RESTAURANT INDUSTRY 74,449 71,849
Source: “Restaurant Industry Factbook 2015,” Restaurants Canada, www.restaurantscanada.org/wp-
content/uploads/2016/07/RC_PocketFacts_15_EN_FINAL , accessed September 1, 2016.
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Page 11 9B16C052
EXHIBIT 2: BEEF INDUSTRY SUPPLY CHAIN
Source: Marcy Lowe and Gary Gereffi, A Value Chain Analysis of the U.S. Beef and Dairy Industries (Durham, NC: Center
on Globalization, Governance & Competitiveness, Duke University, 2009), 14, accessed August 15, 2016,
www.cggc.duke.edu/environment/valuechainanalysis/CGGC_BeefDairyReport_2-16-09 . Used with permission.
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Page 12 9B16C052
EXHIBIT 3: NUMBER OF TWITTER MENTIONS FOR EARLS, APRIL 26 – MAY 8, 2016
Source: Company files.
EXHIBIT 4: NUMBER OF RETWEETS ON TWITTER FOR EARLS, APRIL 26—MAY 8, 2016
Source: Company files.
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Page 13 9B16C052
EXHIBIT 5: EARLS RESTAURANTS’ CLARIFICATION REGARDING CERTIFIED HUMANE BEEF
Source: Earls Restaurants Facebook post, April 28, 2016, accessed August 4, 2016,
www.facebook.com/earlsrestaurants/posts/10154198187923179:0.
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