How to Build a Disaster-Proof Business [Learn from Waffle House]

FEMA uses Waffle House as their disaster gauge - here's why construction companies should copy their playbook. Learn how this 24/7 restaurant chain's disaster planning and logistics can help your construction business stay running when crisis hits. 

Listen to discover their proven systems for supply chain management, workforce readiness, and emergency response.

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Topics Wade and Stephen cover on this episode:

• 00:44 - Importance of cash flow
• 01:45 - Contractor cash flow challenges
• 03:29 - Personal experience and motivation
• 05:05 - Profit First for contractors
• 06:32 - Contractor Profit Paradox
• 08:34 - Failure of traditional advice
• 10:27 - Great Recession lessons
• 12:07 - Implementing Profit First
• 13:51 - Major teachings overview
• 16:25 - Practical action steps

LINKS

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Visit the episode page at https://carpentercpas.com/wafflehouse for more details and a transcript of the show.

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Find all episodes and related links at ContractorSuccessForum.com.

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Wade Carpenter, CPA, CGMA | CarpenterCPAs.com
Stephen Brown, Bonding Expert | SuretyAnswers.com

Transcript

[00:00:00] Wade Carpenter: Did you know FEMA uses Waffle House to gauge disaster severity? This unlikely hero has mastered resilience and logistics, lessons construction companies can use to tackle unexpected challenges. Today, we'll explore the Waffle House Index and how its strategies can help your construction stay ahead even under pressure.

This is the Contractor Success Forum, where we share strategies for running a more profitable construction business. I'm Wade Carpenter with Carpenter and Company CPAs, joined by Stephen Brown with McDaniel Whitley Bonding and Insurance.

Stephen, what do you think construction companies can learn from Waffle House's ability to thrive during a crisis? 

[00:00:33] Stephen Brown: First, Wade, I think this is a great topic. You brought this up based on a YouTube video that you saw, and I tell you, it's fantastic. What does it mean? What is the Waffle House Index? Can I talk about that a little bit first?

[00:00:46] Wade Carpenter: Absolutely, I think they need some context

[00:00:48] Stephen Brown: here.

Okay, so the Waffle House Index is an index that the Federal Emergency Management Association here in the United States uses to do their disaster planning.

 Whether a Waffle House is open or closed could depend on the severity of how quickly they need to respond to a storm. They're actually using, business enterprise, a corporation, and their methodology to make decisions about emergency planning. And I think that's fantastic. It seems to work, Wade. 

So the Waffle Houses in the United States are all over the coastal areas. That's where they're located. They're located in the most hurricane, tornado, flood prone areas of the United States. And because they're located there, they've had to develop systems that are absolutely mind boggling to stay open, no matter what the situation is, no matter how bad it is. From actually completely losing a Waffle House to the ground, and by having extra Waffle Houses nearby, that planning ahead of time, to simply having all the supplies, all the food, help for their employees that may be affected by that storm in the area, and bringing in other employees from the storm.

And I think the most fascinating thing to me too about this index is that Waffle House has an emergency center. They have an emergency playbook. They have a green light, yellow light, red light that FEMA follows that tracks Waffle House exactly. And Waffle House works with FEMA. 

Red light means that that Waffle House location is completely destroyed. The yellow one means it's been affected by the storm, and the green light means it's functional. And what degree of functionality that is, is all spelled out exactly in the playbook that is provided. 

Another thing that's so interesting about this Waffle House story, Wade, is that, Waffle House is not franchised. They can act on behalf of all of their locations as a corporation.

 The two entities that FEMA and others thought were closest to Waffle House, as far as their emergency planning, were Starbucks and Dunkin Donuts, I believe. The video said that they didn't even come close, that they're not even the same remote league as Waffle House for emergency preparedness.

So what I got from this situation, Wade and I wanted you to touch on some also things about this, what Waffle House does that just blew your mind, that could help our contractors. I think the most exciting thing to me is a corporation is performing better than the government-- and nobody's surprised about that, but that it's the leader, and it's light years different from any other corporation. 

[00:03:11] Wade Carpenter: Yeah, absolutely, and I've found it a fascinating story too. They basically created it back in 2004. director of FEMA back then had noticed that, even after major hurricanes, a lot of these waffle houses were up and running when nobody else was able to. And it's a pretty fascinating story to see how they have prepared for the storms and how they're able to recover so quickly. The Video talks about Waffle House does not do any marketing and their marketing is, hey, we're here 24 hours a day, seven days a week.

And so it was pretty fascinating, I thought there was a lot of parallels, not that we, in construction, we have to recover as quickly as that, but there's a lot of lessons here in logistics, as well as thinking about disaster planning for your own business. But I think there's a lot of things that we can learn from this. Want to dive in a little deeper?

[00:03:57] Stephen Brown: Sure, and another thing that is just so universally true is that old saying is people don't want to know how much you care. And at Waffle House, they understand the importance of hot coffee and a hot breakfast. When you're going through a nightmarish situation, your house is flooded, you're cold, you're scared, you can come to the Waffle House and join in your community, which Waffle Houses are community spaces.

It's a business built on community and they're going to make sure that you get what you need to keep going. And Waffle House doesn't advertise, it's word of mouth. And that's another interesting thing. So they are giving a thousand percent to their mission. And that is to provide fresh, hot, consistent breakfast in the best possible environment. That's my guess is what their, business model is based on. 

[00:04:41] Wade Carpenter: Yeah, I'd like to maybe dive into some of the specifics of how they do that. And they've got all these backup plans from, if the power goes out, they can still, they said stuff like they would pre-grind enough coffee. As long as they've got natural gas, they could boil water on the stove. 

[00:04:56] Stephen Brown: They have backup water bottles. 

[00:04:57] Wade Carpenter: The detailed playbooks that they talked about, Playbooks that they had in place, the step by step preparation before and what to do after. 

[00:05:05] Stephen Brown: The playbook is actually a physical handbook that each store has. It doesn't depend on a computer to pull it up and go over the playbook. The management and staff goes over the playbook on a regular basis. It's written out exactly what to do. This is what you are able to cook and sell to customers in certain situations.

You can take cash for every transaction. You may not be dependent on computers or the internet. The cooktop is propane. What's so interesting, that they even have tea candles that they light and put on all the tables if there's no power inside. 

So they can cook with the propane, which they have a backup supply of. The candles can provide lighting. If a roof is leaking, or if one of the glass panels is broken, they have in their playbook exactly what to do to stabilize that situation in order to provide just the bare minimum that folks in that area might need.

And another thing, Wade, is in that playbook, it just spells out, they know exactly what Waffle Houses are not going to be prone to a disaster that's coming. They know. They know how close they are, and they've already communicated to other stores, we may need you to be on standby. Who's available? And immediately everything from the employees to the backup help and contractors that are needed to get their stores up and go.

This is all in the playbook. Every single question that you have as an employee of what to do in a disaster situation is spelled out in that playbook.

[00:06:27] Wade Carpenter: Absolutely, and I know they had, little key fobs. That's if the power goes out, contact your local home restaurant, if you're e able to work and you're fine, and there's another store open, they can send you to a different store. There's a lot of things in that playbook that I've found that were pretty fascinating. 

One of the other parts of this is pre staging supplies. They talked about taking enough food, generators and all that stuff. They pre staged the supplies, sometimes outside of where they thought a storm would hit so that they could get them to it as fast as possible. They did things like they would order extra food and have a week's worth of food on site if they could. 

And, the whole thing was pretty interesting to me to say if you don't have electricity, you can still do this and that. Like you said, you don't have a cash register, then you can still take cash. 

But, let's go down the, pre staging supplies, what are your thoughts on that and any parallels? I know we probably need to come back to the construction, but. 

[00:07:15] Stephen Brown: No, there's huge parallels to construction. And Wade, this is what I do for a living. It's risk management, it's insurance. Bonding's a part of it, but insurance is just mitigating risk. So when you have a risk, we are always taught there's different ways to mitigate that risk. 

There's to avoid it altogether if you can, there's to transfer that risk contractually, and there's to separate those risks like Waffle House does by having different locations in the nearby vicinity. 

And the supplies, the backup, we learned that in COVID when there was a supply chain backup. Contractors were able to work through COVID. It was a necessary industry.

You had folks that needed parts and supplies for wastewater treatment plants for utility, underground utility, work, sewer, water lines, everything involved to keep vital infrastructure work going, was becoming a nightmare. Especially the smaller parts. 

Our dependence on overseas distribution to get those parts, and how our ports were just bottlenecked over COVID, that there was just ship upon container ship after container ship just waiting outside to land at a port.

These are huge lessons that we've learned and we made it through it. I think the most important thing that I get out of this supply chain logistics is that now we're not talking about if this is going to happen, it's when it's going to happen again. And what are we going to do about it? 

What I like is the playbook is for every single employee. This is what you do. In a large corporate environment, you might be intimidated of making a decision that might get you in trouble or might hurt the project. Yet you've got a playbook that's basically authorizing you, that when this happens, you do this. So it's taken that unease out of the equation.

And we've done podcasts on putting systems in place. Just put them in place so you can track and monitor things. A lot of our listeners may not have done that yet. 

And then you take the episode we did on the contractor that was the dirt contractor that was absolutely voted the best of the best. What did they do different? They did everything different. They did everything to stand out. They did everything to be better. And that's the mentality. That's the mindset that they have, and that I believe all our listeners should have, it's my job to worry about risk. , that's how I make my living. 

[00:09:18] Wade Carpenter: Let's unpack a couple of things you just said. Let's come back to the systems, because I think that's a very key part. 

But, let's go back to the part about workforce readiness. What I found fascinating in the story was the fact that, they basically have hierarchies to manage staff, and they have what they call jump teams.

Basically, they had employees from unaffected areas that they would send in, and people would volunteer to go, and they talked about several different hurricanes that people would come from all over the country to help keep Waffle House staffed. The current team could not get there or they were dealing with their own family, they needed to be able to, supply the workers there to be able to run the business. 

[00:09:52] Stephen Brown: The utility workers that go from different cities to help out other municipalities that have power outages, nobody is used to traveling more and staying in hotels and strange places, than a contractor.

The parallel is, it just goes together perfectly. You have emergency response in that area that probably has more resources than your contractor might have when they go into an area. And I think right now about all my customers that are over in North Carolina, fixing the flooding problem over there, I have a number of them. They're gone. They didn't just wait til a disaster happened and said, Hey, can you use us? We'll figure out how to come over there and help.

They're gone. They're working, they're helping, they're making money doing that, it's fulfilling and necessary work for them. 

[00:10:32] Wade Carpenter: I think there's still more to unpack here. There was the issue with the centralized command, which You know, , not every contractor, obviously, is a large corporation that can have these people spread around them.

When you've got a disaster, you need some kind of centralized command. Who's in charge and what needs to be done? And like you said, having that workforce that has some power to take on things, take on the management when you need to.

And the other part of this is the adaptability. What was fascinating with Waffle House, If they don't have power or they didn't have gas or something like that, they had limited menus and created workarounds, like I mentioned, the pre ground coffee, the bottled water, to keep operations running.

The whole point is, how can we adapt our systems when we need to? So I think that's where the parallel comes in here. 

[00:11:17] Stephen Brown: No I couldn't agree more, Wade. Those systems were adapted when they needed to be, and now they're adapted on such a high level with Waffle House, that it just sets an example of what can be done. Even on the smallest scale if you have three employees, You're the source of that disaster plan. You have to think it through. 

But it starts somewhere. It starts with that mindset. The same mindset that turned around workers comp claims. The mindset was that safety starts with you. So does planning, logistics, all these things, can be started by you and you can get all the help you need.

And remember that everybody's learning at the same time. And that's why it's a business, it's not just you running the show, hopefully. You've got other people to help you. 

[00:11:55] Wade Carpenter: Exactly, in construction cases we have centralized project monitoring, and if, say, a project manager is out sick, or something happens to them, or they quit, the whole process doesn't fall apart. The adaptability on a job site, being able to adapt when things go wrong, and recover rapidly.

So that's basically, integrating some kind of buffer time and project schedules to recover from these setbacks. I think it's common sense 101, in construction project management, but, I think there's a lot of things to be thought about here.

[00:12:23] Stephen Brown: Sure, and one thing that I think ties in so neatly is how they think about employees. You have employees that are on a certain job site and they move their families to that job site. They're living there, possibly, and something happens. Those employees need to be taken care of. And then other employees need to come in and finish the work. Because, something happens to me, I've got to take care of my family first.

And that's the way Waffle House thinks about it. That's the way contractors should think. And also, Wade, I see, and we didn't discuss this, but I see, the whole concept of time in construction projects is just off. In the bonding company, everybody thinks in terms of liquidated damages.

How much are those in your contract that could come back to haunt you? And, in the federal government, you get rain days. You get storm delay days added back to your contract. In private work, you don't. But either way, what does that mean, Wade? That doesn't mean anything. A rain day, not a rain day, that doesn't mean anything to a contractor.

What is most important is that they can continue to work because that job's got to be done.

And we talk so much, Wade, about there's a limit on how much money a contractor can make on a project, and there's no limit on how much they can lose. Okay, that's just built in the DNA of a contractor, right?

But when you think about it, that's everything. You've got to stop the bleeding before it happens. It's like having a first aid kit for something that's going to happen in the future. 

[00:13:36] Wade Carpenter: Absolutely. And, going back to what you said there, the whole purpose of this is, in construction, a lot of times you've got a client that hopefully it's not one and done contracts. Maybe a major corporation will use the same contractor all over the country.

It's about establishing that trust and reliability. Waffle House is always there 24, 7, 7 days a week, 365 days a year. It's about the consistency in operations that builds that loyalty and trust. 

[00:13:59] Stephen Brown: Yeah, exactly right. Your customers are going to demand this from you as a contractor. If you don't provide it, you'll be getting worse customers. You'll be getting less consistency. The best clients, the best backup sources for work, industrial plants, for example, you do side work for them.

You have to have your playbook ready to roll just for them. That's all they care about. 

[00:14:19] Wade Carpenter: Right. Your clients, your customers of your construction company, they value a company that can anticipate challenges and deliver results for them. I think there's a lot of takeaways we can take from this whole episode. 

[00:14:30] Stephen Brown: I think we already have. Just to get people started thinking about it. I hope our listeners listen to this podcast and maybe look up the Waffle House and that video to see what we're talking about on YouTube, and start thinking about it. 

On that one particular video, it blew people away. I noticed there were 1400 different comments that people made about the Waffle House index, the Waffle House system of emergency preparedness, the Waffle House system of staying in business.

[00:14:56] Wade Carpenter: And I think we could probably link to that in the show notes if you're trying to find it.

 The takeaways for me, I know construction is not the same thing as running a restaurant, obviously. But how can a construction company apply these principles to improving their project management, their customer satisfaction?

I think there's a lot of lessons here, and I think if nothing else, hopefully we made you think about what you're doing in your business and how you might take some of these lessons and apply it to your own business. 

Okay. If any of our listeners have any thoughts or feedback on today's discussion, we're always happy to answer questions, hear your thoughts on topics you'd like us to cover, drop them in the comments below. Thanks for listening. 

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