Drive-throughs, delivery are now crucial to a restaurant’s success: Former Yum! Brands CEO

Yahoo Finance's Brian Sozzi, Myles Udland, and Julie Hyman speak with Former Yum! Brands CEO and NetBase Quid Board Member Greg Creed about the state of the restaurant industry.

Video Transcript

[MUSIC PLAYING]

BRIAN SOZZI: As we look back at the past year, it's clear the next six months for the restaurant industry is shaping up to be vastly different than the past six months. People get vaccinated and venture back outside, and they'll put extra pressure on restaurant industry leaders to get their reopenings done right. Let's dive into this with former Yum! Brands CEO Greg Creed.

Greg, good to speak with you, as always, here. Very interested on what your friends in the restaurant industry are saying. Or how are they preparing for the recovery? We know what's coming, what are they doing? Are they hiring more people? Are they buying another grill? What are you seeing and hearing?

GREG CREED: Look, I think one of the most important things is to obviously get people vaccinated. That will get people outside. But I think what's also really becoming important is this-- what I call the emerging cultural code. There is so much change going on in society that for brands to be relevant, they've got to make sure they're at the emerging part of this cultural code.

And so it's really important that they tap into what is emerging culture, otherwise, you can say the wrong thing. I mean, a great example was I think a couple of days ago, Burger King in the UK put out a post saying, you know, women's role is in the kitchen. Now, their intent was to actually talk about culinary and getting women into-- more women into culinary, which is honorable.

But that was not how it was perceived. In fact, my daughter-in-law said, that was a Whopper of a mistake. So I think it's the physical reopening and it's the physical preparation, but it's actually more important to make sure that brands are on cultural code. And so that's where something like the NetBase Quid, which I'm a part of, I'm an advisor and a board member.

What they do is prepare brands to understand fact-based, what is the emerging cultural code? So they can tap into the right things, but they can also avoid doing the wrong things and alienating their customer base.

BRIAN SOZZI: And Greg, how do you think the restaurant industry will rebound this year? There's so many differing opinions. The restaurant industry has been, anyway you look, has been cut in half. I mean, restaurants simply no longer exist. How do you expect the recovery to look?

GREG CREED: Well, I think there's been winners and losers like there has been in everything, Brian, which is, you know, I think that QSR, fast casual, they've been winners. If you have a drive-through, you've been a winner. If you've been able to do delivery, you've had a winner. I think if you're a dining-only concept, I think it's been difficult.

But what you've also seen is these dramatic shifts. You know, people have obviously had more food delivered. They've found that to be an easy way to do it. And they're going to continue to do it. But I think you will see restaurants-- it would be hard these days if you're in the QSR or fast casual category to want to build a restaurant without a drive-through.

Because I think drive-throughs have basically saved the industry. Or not the whole industry, but certainly the QSR fast casual industry I believe has been saved by the fact that they've got drive-throughs. So to build a restaurant without a drive-through I think would be a monumental mistake.

And you see, also, brands adding multiple lanes to drive-throughs. So you see that occurring as well. So I think people are realizing that drive-throughs, delivery are critical to future success in the restaurant industry.

JULIE HYMAN: Greg, it's Julie here. You were talking about sort of the culture at these companies, right, between them and the public. But also, I'm curious your thoughts about the culture of them and their employees. Because there's been so much focus on that relationship throughout this pandemic, right, particularly when it comes to what we now consider to be front line workers, right?

People who were working in these restaurants even amidst the worst of this, whether it was in the drive-through or actually in the stores. What do these companies really need to focus on with that, especially given that we saw that effort at an increase in the federal minimum wage fail in the United States?

GREG CREED: Look, I think you're absolutely right. There's sort of two culturals. There's the external cultural code, and then there's internal organizational culture. And you've got to understand both of them. And as I said, something like NetBase Quid, there's a way to understand them because it's critically important.

I don't know whether you saw an example, I'm an Australian, as you can probably tell from the accent, there was an interesting case in Australia this week. It happened to be a law firm, not a restaurant, but I think it makes the point, which is that a partner in a law firm decided to defend the strained attorney general against rape charges from 30 years ago.

And the CEO of the law firm wrote a note to the 20 employees basically saying that was the wrong thing to do. Well, what the CEO didn't understand is that in a law firm, people believe you're entitled to a defense and you're entitled to the presumption of innocence. And so the CEO, not understanding the internal culture, made a massive mistake. And I understand the CEO has actually stood down.

So understanding your internal culture, leveraging your internal culture. So I know at Yum! Brands, early days, people in the back of the restaurant have always worn gloves. That's obviously been the case. But I know at Taco Bell, they put people into gloves at the drive-through. Was that really important from a pure, I guess, scientific point of view? No, but it made two important statements.

It said to our employees, we really care about your safety. And it said to the customers that the brand cares about their employees' safety as well. So internal cultural codes are just as important as tapping into the external cultural codes that are occurring in society.

MYLES UDLAND: Greg, it's here Myles here. You know, speaking of that culture, how are you thinking about geographies going forward and the physical footprint of certain brand groups, regardless of their industry? I mean, the way that we all conceive of physical space has really changed within the last year.

A lot of people have moved to places they probably never could have lived before because of remote work, things like that. And there's certainly an element of a corporate culture that is maybe more difficult to transport geographically. I'm just curious how you're maybe thinking about those challenges which are certainly going to be considerable for businesses.

GREG CREED: Yeah, you know, the most important thing is if you had a great culture before you went into this, obviously, that's a help. I think if you went in with a poor internal culture going into the pandemic, trying to build a culture in this climate is going to be incredibly difficult. So I think it's about leveraging.

I do think it's interesting that there are people-- you know, I talk to people who, like, can't wait to get back to a restaurant, who really want to be able to sit down and enjoy that experience. As you said, people are moving to remote locations. So the big US brands, the brands that have a big footprint across both the US and across the world, will probably benefit as people relocate from urban to suburban, suburban to rural.

So I think the big brands will benefit because they've got such a massive footprint. I mean, Yum! in the US has, I think it's close to probably 20,000 restaurants. McDonald's, 15,000 restaurants. So you can imagine there isn't a rural, suburban, urban area where you can't get one of those restaurants. So I think those big brands will win.

I think, as I said earlier, the brands with drive-through will win. And I think the brands that have really leant on their internal culture, which they invested in well before the pandemic, to do the right things both for their front line employees and to demonstrate to the customers that they're doing the right thing to their front line employees, will be a tipping point.

I mean, David Gibbs, who's the CEO, who succeeded me, gave up his salary, why? So that they could pay $1,000 bonus to every RGM who worked at Yum! That news, that is on cultural code because that matters to people, that CEOs are prepared to give up their salary, in David's case, in order to benefit the people who are on the front line delivering great service to customers.

That stuff really matters these days. And being on cultural code and understanding it is critically important.

BRIAN SOZZI: Greg Creed, former Yum! Brands CEO. Always good to speak with you. Stay safe, we'll talk to you soon.

GREG CREED: I will do. Thanks, Brian. Bye, bye.