Preparing for the WorstWhen disaster strikes, how can you protect your business?
By Chris Ryan
Michael Monnahan clearly remembers his disbelief last summer upon hearing that unusually heavy rainfall was likely to cause flooding in Cedar Rapids, Iowa, putting his retail-roaster, Blue Strawberry Coffee, in danger. “We’re in the 500-year flood plain, and it just had never happened before,” he says. “I figured at best we might have water up to the front door and we’d be closed for two days.” To be on the safe side, Monnahan and his staff moved as much equipment as they could from the basement to the ground floor, onto tables 32 inches high. The precautions weren’t enough, however: On June 11, unprecedented rainfall flooded the shop with 41 inches of water, causing catastrophic damage. Nearly six months later Blue Strawberry is still closed, and Monnahan is finally completing the daunting cleanup process and preparing to reopen.
The unexpected can happen to anyone—whether it’s a natural disaster, a fire or some other freak occurrence; for example, as Fresh Cup goes to press with this issue, a massive ice storm has caused power outages for hundreds of thousands of New England homes and businesses. Retailers and roasters can combat the unknown by having a disaster plan in place. For retailers, the plan will likely weigh heavily on insurance coverage. For roasters, preparedness can extend to a backup roasting company to get through the tough times. When disaster strikes, utility companies typically prioritize residences before businesses, so knowing how to help yourself may be key. It’s never fun to think about the worst that can happen, but by being prepared, you could save yourself time, money and countless headaches.
WHAT'S IN A PLAN?
Emergency preparedness is not a new concept, but in recent years the U.S. government and other organizations have given it a higher profile. In 2003, the Department of Homeland Security launched ready.gov to educate the public on “how to be prepared in case of a national emergency—including a possible terrorist attack.”
Since then, ready.gov has expanded to include information tailored to specific groups, including businesses. According to the site, at least one in four businesses affected by a disaster never reopens, and small- to medium-sized businesses are the most vulnerable following an emergency. The majority of independent coffee retailers are in this category, and ready.gov provides information for them on risk assessment, continuity of operations planning and many more practical topics.
Sometimes a problem can arise from the most mundane, unexpected source. Ed Wethli, owner of roaster-retailer Kiva Han Coffee outside of Pittsburgh, recalls the time a sewage line opened and flooded the interior of one of his retail locations. “We were down for two weeks,” he says. “And that store was doing at the time about $1,200 a day.” Wethli says the principal lesson he learned from the experience was the importance of having mitigation insurance, which covers the costs of cleanup following a disaster—something that quickly gets expensive, especially if your municipality requires a licensed organization to do the work. “In most situations, you can’t just go in and clean up the flood water,” Wethli says. “You actually have to have a mitigation specialist come in and clean it up for you, and it’s expensive.” For Monnahan at Blue Strawberry, one of the biggest downsides to the flood’s surprise attack was that he and other neighboring businesses were not covered. “Nobody had insurance,” he says. “This is something that’s totally unexpected when you’re on a 500-year flood plain.”
In addition to mitigation insurance, Wethli recommends retailers get loss-of-business insurance to cover lost sales during any period you may be closed. “If you’re a small retailer and you’re making a small margin, if you’re down for two weeks, that could kill your business,” he says. Retailers also should make sure that their insurance deductible—the amount they must pay out of pocket—is affordable, and also that they know who their agent is. “You want to have a good relationship with your agent, so when you call them up, they’re going to respond to you quickly,” Wethli says. “Some small businesses, the last thing they’ll pay is their insurance bill.” Lastly, Wethli recommends keeping money in an emergency fund. “Make sure you have working capital set aside to actually stay in business,” he says. “And make sure that you have some money set aside if you’re not going to be able to be open for two weeks, to pay vendors and employees.”
THE ROASTER ROUTE
In recent years, high-profile natural disasters such as 2005’s Hurricane Katrina and 2008’s Midwest floods have captivated America. Not surprisingly, these events affected myriad small businesses, including many in the coffee industry. After Katrina broke levees in New Orleans, one business affected was Coffee Roasters of New Orleans, which had taken in six feet of water from the storm. “We prepared for typical expectations from our past experience, of maybe getting a couple inches or a foot,” says roaster Bob Arceneaux. “Nobody would ever have dreamed that that could have happened. I mean, you dream about it, but it’s a nightmare.” The company’s roaster was flooded, 130 bags of coffee were ruined and countless other damages were incurred. “If it could float, it did float, and it
floated somewhere else,” says Arceneaux.
Arceneaux was then faced with a challenge: Many of his customers were not affected by the hurricane, and were expecting to receive their coffee on its normal schedule. How would he deliver it? Roaster manufacturer Terry Davis of Ambex says this is an important question to consider. “For wholesale roasters it’s a little scary because if you’re down long enough, some of your accounts may just leave you because they’ve got to have coffee. So it’s a chance for other companies to come into your account. And maybe they’ll stay with them.”
The answer to the dilemma, and an important part of a disaster plan for any roaster, is to have a backup company that can do your roasting for you in a pinch. Arceneaux didn’t have one when the hurricane hit, but he drew upon a Roasters Guild connection and called John Melancon at River Road Coffee in Baton Rouge, about 90 minutes from New Orleans. Melancon let him use his roaster after hours, and Arceneaux was able to fill orders this way for about five weeks, until Coffee Roasters of New Orleans acquired another building and got back up and running.
When choosing a backup roaster, proximity is key: the closer, the better. “You need it as local as possible, for sure,” says Jones Coffee Roasters’ Chuck Jones, who has a backup plan in place. “If there was a disaster, like an invasion that shut down our entire system, you want [your backup] right in your backyard.” Capacity and compatibility are also important facets: The backup should be able to produce as much or more coffee as you do, and you should know how to use their equipment. “My security with my two backup roasters is that I’ve roasted with them before, on their equipment,” says Jones. “We know what their procedures are for getting ready to roast, for purging the system, for warming up the machine, and then what we need to clean out.”
Another important factor is trust: You and your backup are going to be working closely enough to learn the inner workings of each other’s business. “You have to pick your alliance very carefully,” Arceneaux says. “They’re going to find out your blends, they’re going to find out what coffees you’re buying. You have to be willing to open yourself up for a little bit of exposure.” But he says that, to an extent, the spirit of competition decreases in favor of camaraderie. “They’re going to be inconvenienced, but it’s reciprocal. If he has a problem, I am going to take him in, and I’m going to do what I can to help him because he’s willing to help me. It can’t be a one-way deal. I mean it could be, but it doesn’t hurt to offer it the other way around.” Jones agrees, saying that being respectful of the backup company’s generosity is key to keeping the relationship going. “If we leave a mess, then we’re screwing up the relationship. It’s kind of a specialized task, so it’s not like we have a lot of options out there.”
After suffering a major setback with Hurricane Katrina, Arceneaux and the staff at Coffee Roasters of New Orleans put together a comprehensive hurricane plan. In addition to identifying a backup roasting company, the plan entails moving everything of value either out of the roasting area or high off the ground on racks. This summer they had their first drill, and found that what was supposed to take a couple of hours ended up taking all day, as they ran into space constraints. However, the troubleshooting process eventually helped them find room for everything, and the drill came in handy. “Exactly a week later, we had to do it for real for Hurricane Gustav,” Arceneaux says. “We made room for everything, and we confirmed our arrangement with our backup roaster.”
Once everything was safely stored in the warehouse, Arceneaux set out for River Road with the supplies he would need to run the business remotely. “I had 10 bags of coffee, I had computers, I had a printer, I had a monitor,” he says. “This is the advice I would give somebody: How fast can you set up shop in someplace new? If somebody will take you in and you need to set up your whole office, how fast can you get everything packed up, and then mobilized and set up in another place?” And though he was prepared this time, Arceneaux didn’t need to enact the plan. “I went three or four days driving around with 10 bags of coffee. I didn’t have to put it into effect, but if necessary, I was prepared.”
ANYTHING CAN HAPPEN
Natural disasters’ life-altering nature grab our attention, but the reality is that your own emergency can occur at any time. “Maybe something happens to the building, termites get into some wood that you didn’t know about and some wall comes crashing down and you can’t work,” Arceneaux says. “Or maybe it’s a really bad windstorm and the roof gets ripped off.”
Freak occurrences won’t happen often in the life of your business, but you never know what may lurk around the corner. “It doesn’t hurt to have a plan,” Arceneaux says. “Review it once a year and check that everything’s still copasetic, and then go about your business. Hopefully you can go the whole life of your business and never have to deal with it.”