Burgerville: A Sustainability and Sourcing Case Study

A version of this case study appears in Case Studies in Sustainability Management, The oikos Collection V3. This case study has been modified for length.

By Darrell Brown, Phil Berko, Patrick Dedrick, Brie Hilliard, and Joshua Pfleeger 

Jack Graves is considering buying chicken. More precisely, Jack is considering where to buy chicken. He needs to make a recommendation to the purchasing team soon, and the decision is complicated. Jack is a long-time employee of the Burgerville restaurant chain, a quick-serve restaurant chain in the northwestern U.S.

Burgerville prides itself in being true to its long-held values while maintaining profitability and growth. Graves’ primary job at Burgerville is to assure that the company’s values are embedded in all its actions, including its relationships to its supply chain. His current concern is the dilemma of which values to promote. Burgerville sells chicken, lots of chicken. So the purchase of chicken has significant impacts on the social and environmental impacts of Burgerville’s supply chain. Should Burgerville buy local, with the inherent social and environmental benefits, while paying attention to concerns about labor issues, animal treatment, and non-organic stewardship? Or should it find a supplier with some assurance that these potential problems are eliminated, regardless of location?

Jack knows that Burgerville needs to address this issue soon, as the supply of chicken that is produced to Burgerville’s high standards is small and there are sure to be competitors seeking the same products. He will have to weigh the company’s values and make a recommendation soon.

Over the past decade, Burgerville has made a concerted effort to ensure its purchasing supports it values. As of 2009, over 70 percent of Burgerville’s total spending on food products was from local suppliers, up from less than 60 percent in 2008. With chicken, though, Graves was faced with some difficult questions and hard choices: can Burgerville find a local supplier who can provide a sufficient quantity and quality of breaded and plain chicken breasts and chicken strips at a cost comparable to the existing national brand supplier? Is buying local the most important decision to make for Burgerville and its image? Is the issue more than simply reducing the distance the food travels from origin to the customer? Are Burgerville customers willing to pay a premium for locally sourced chicken?

It makes sense to purchase from local farmers who may then become loyal customers, but what if distant farms operate more sustainably than the local farms? Is there a sustainable chicken farm that could handle Burgerville’s demand? These questions weigh on Graves’s mind as he struggles to balance the chain’s profitability with the company’s values.

Typical quick-serve industry sourcing

The quick-serve industry typically divides its food purchases into two categories – proprietary and conventional. Proprietary items are processed items that have been custom formulated for the equipment, packaging, standards, and menu items of a specific restaurant chain. The restaurant chains purchase these at a contract price, and they may include French fries, milkshakes, ice cream, meats, and toppings – any food items that are unique to a particular chain.

Conventional items are more commoditized and are generally used by a variety of different chains and generally include condiments, produce, and soft drinks. Prices for conventional items tend to be market based and negotiated through corporate offices. Many restaurant chains enter into long-term agreements with suppliers to ensure a steady supply of the quantities needed at a predictable price. These agreements often put downward pressure on prices, reducing total costs to purchasing chains, either increasing the profit margins of the final products to the restaurants or reducing the costs to the ultimate restaurant consumer, or both.

In recent years, the practices of national and global quick-serve companies have come under considerable criticism. A number of chains have been criticized for forcing supplier prices down so far that wages paid to farm laborers are below subsistence levels. Similar concerns about the treatment of animals throughout the supply chain of quick-serve restaurants resulted in public responses to mitigate potential damage to corporate and industry reputations.

Sourcing issues also are an area of concern for the quick-serve industry. In India, McDonald’s demand for lettuce encouraged farmers to adjust their agricultural practices to grow lettuce year-round rather than only during the winter months to provide for McDonald’s needs. While this allowed for McDonald’s locations in India to source local produce, this decision also affected the overall agricultural industry within the affected areas of India, as it changed the production of formerly grown produce.

Local sourcing

The concept of promoting local food systems has recently gained popularity, partially as a counter to the results of an agri-food industry dominated by a few firms. The goal of the local food movement is to shift away from globalized networks of distribution and revert to local communities supported by, and supportive of local production. Local food systems provide primarily what is readily accessible in the local geographies. This movement hopes to contribute to economically sustainable, environmentally less damaging, and socially supportive communities. Local food systems generally minimize “food miles,” support farms able to patronize the businesses to which they supply product, and rely on, and pay, local labor. Beyond the potential advantages of local food quality, the local food movement tends to encourage more socially and environmentally sustainable food production and sourcing through intentional spending.

Changes in food system preferences are characterized by consumer interest in many forms, ranging from a wide variety of third party certifications for organic or sustainable products to a dramatic increase in the number of local farmers’ markets, springing up all around the United States. The local food movement has grown to the point that larger entities are under pressure to source their food products locally.

Bringing food to Burgerville

Burgerville locations are typically run by a manager and two assistant managers. This management team is responsible for placing orders for their own restaurants from Burgerville authorized distributors, who make deliveries directly to the stores three times per week. The accompanying invoices are sent to the corporate office, where they get paid. This direct delivery eliminates the need for a commissary, which would distribute foodstuffs internally among Burgerville locations.

Burgerville, like other quick serve restaurants, constantly refines its menu items. Unlike many of its competitors, however, for Burgerville this refinement includes adding vegan and vegetarian options, fish, and limited time offer seasonal items. The company began offering these rotating menu items based around seasonal foods in 2008 and have begun asking local “foodies,” and celebrity chefs to create new offerings. Typical items include entrée sandwiches or side order items such as “The Roasted Turkey & Cherry Chutney Wrap,” developed by Allison Hensey, director of The Oregon Environmental Council. A percentage of the proceeds for this particular item benefit the Council, supporting the “healthy foods and farms” program and promoting the environmental stewardship and economic vitality of Oregon’s farmers and ranchers. Additional seasonally rotated items include fresh, local berry milkshakes, fried portobello mushroom wedges, fried asparagus spears, and Walla Walla sweet onion rings, and are eagerly anticipated by patrons each year. Ingredients for most of these items are not part of Burgerville’s normal food inventory, nor of its distributors’ product lines. As such, seasonal ingredients must be sourced and incorporated into the Burgerville supply chain as new items are added to the menu.

Burgerville’s mission to support local farms and local businesses has extended to the current day, where local ingredients are needed to supply 39 different locations with standard menu items in addition to these specialty and seasonal items. Burgerville pioneered a unique farmer–distributor system that allows them to maintain relationships with local farmers, as well as introduce those farmers to other potential customers and distribution channels. In this system, Burgerville will find a local farm that produces a specific product that they need for a menu item. Then they will go to one of their two main distributors, Sysco Corporation and Fulton Provisions and arrange for the farmer to supply products to the distributor. From this point, Burgerville can simply add the product to the regular orders they receive from that distributor, as well as give other firms that use that distributor access to the products.

Sourcing the product through a distributor means that the farmers can focus on agriculture instead of distribution. Troy Thomas, head of produce procurement for Sysco Corporation, one of Burgerville’s main distributors, says: “This allows us to do what we do best – transport food, while allowing the farmers to do what they do best – grow good food.” Burgerville sees the inherent value in this consumer– producer relationship that varies from the more common, consumer–distributor relationship seen in supermarkets around America. The farmer benefits through access to a market that is larger than Burgerville alone, while other customers seeking local products benefit by having access to new products through their nor- mal distribution methods. This farmer–distributor system serves to benefit Burger- ville, local farmers, associated distributors, and consumers, all by making local food more widely available.

Past sourcing issues

Jack Graves, as a long time Burgerville employee, is well aware of the past supply chain decisions. In various ways, these decisions have built an expectation that, through creative work with suppliers and a willingness to deviate from standard industry practices, Burgerville can indeed maintain its economic vitality while adhering to and promoting its core values. These, and other initiatives Burgerville implemented, have made Burgerville a leader and innovator in sustainability in the quick-serve restaurant industry. Jack is proud of that leadership role.

Country natural beef

Fresh, never frozen, beef has been a vital part of Burgerville’s identity since George Propstra grilled the first Burgerville hamburger. In order to meet this requirement, Burgerville must source its beef locally. However, the concerns of procuring beef for Burgerville go beyond geography. While purchasing beef locally met the goal of never serving previously frozen beef, a wide variety of environmental and social issues, including concerns about the health and treatment of the livestock remained important to Burgerville as well. The traditional factory-farming system of beef production is laden with environmental and social concerns; the task of producing the quantities of beef needed to supply an enterprise the size of Burgerville generally leads to farming conglomerates, often contributing to the decline in family farming, farm communities, and the rancher lifestyle. Burgerville was concerned about the treatment of the animals that would eventually be sold as hamburgers to final customers.

Country Natural Beef uses a business model that provides a large quantity of dependable production with a stark contrast to conventional factory farming. Due to this more sustainable ranching model they have enjoyed a mutually beneficial relationship with Burgerville. The Country Natural Beef Cooperative (CNB) consists of nearly 120 family ranches, primarily in the Northwest, all of which come together for the common goal of providing customers with locally raised, humanely treated, and chemical-free natural beef. To ensure that CNB produces consistent, high quality products the ranchers maintain ownership of the cattle throughout the value chain. The only exception is while the cattle are at CNB’s partner feedlot, Beef Northwest. At Beef Northwest, the CNB cattle are fed a diet comprised of cooked potato products, sunflowers and dry distillers’ grain, in contrast to the factory-farming standard diet of corn.

Once the cattle have reached the appropriate weight, Beef Northwest trucks the cattle to a slaughterhouse owned by AB Foods. AB Foods is a sustainably focused company with ranching roots that focuses on high quality products, animal well- being, and humane slaughter. The cattle are slaughtered two days per week on the first shift of the day to minimize the risk of microbial contamination. AB Foods boxes the beef and sends it to Fulton Provisions, a secondary processor and distributor. Fulton cuts steaks from the boxed beef and packages them for distribution to the end users other than Burgerville. They also grind and form the patties for Burgerville restaurants. Each of these intermediaries abides by Food Alliance certification standards and CNB’s additional specifications in regard to treatment of animals, processes for treating sick animals, record keeping, and sanitation.xii Importantly, all of these intermediaries are local, which allows ranchers a great deal of control throughout all stages of production).

Prior to their relationship with Country Natural Beef, in order to meet the volume requirements of the entire chain of restaurants, Burgerville purchased their beef from conventional sources. Jack Graves saw that, considering Burgerville’s values around sourcing, the fit with Country Natural Beef is clear – CNB provides fresh beef, from a local and community oriented source. It has an unwavering focus on sustainability and through a co-op model, has attained the production capacity to meet Burgerville’s year round demand.

Liepold Farms berries

As Jack considered the decision for sourcing chickens, he also recalled a decision five years ago, one he was proud of for its social impacts. In that decision he felt that Burgerville had really made a difference that mattered to the local community. He wondered whether this decision could have a similar outcome. He hoped so.

When it comes to sourcing produce for Burgerville, local farmers have always come first, but strawberry farming in the Pacific Northwest is somewhat problematic. Oregon strawberries ripen on the vine more slowly than in other commercial areas such as California and Florida, where the climate is much warmer and drier in the spring months. Because of this slow ripening process during the cooler Pacific Northwest springs, Oregon berries have been shown to be sweeter than others. When the taste and nutritional integrity of six varieties of Oregon strawberries and five varieties of California strawberries were analyzed, five out of the six Oregon varieties were sweeter than all of the California berries tested. This sweetness makes them perfect for Burgerville’s spring milkshakes.

Unfortunately for Oregon berry producers, however, Oregon-grown strawberries are much more fragile than California strawberries, which can better withstand machine picking as whole berries. When whole berries are desired, Oregon berries must be picked by hand in order to prevent bruising, making it very labor-intensive work. Berry farmers are faced with the task of finding workers willing to do difficult work for low wages for only two months a year. Under normal conditions, if wages were to increase in an effort to attract more workers, small Oregon farmers would likely be put out of business. Large-scale corporate farms produce hardy berries from California at a lower price than Oregon farmers can meet. As a result, wages stay low and willing workers stay scarce. In recent years, berries have been rotting on the vine and farmers have lost their crops, not because of a lack of demand, but because the limited number of willing workers cannot pick berries fast enough. Many berry producers have turned to mechanical picking and producing frozen, rather than whole, berries.

Burgerville differentiates itself on its values, and as such tries to live by their values with each purchase they make. When considering the fit between their values and relationships with their berry suppliers they found an opportunity for improvement. Historically, Burgerville purchased the first berries on the market. They were not purchasing consistently and had no embedded relationship with any single berry producer. In 2005, however, they partnered with Liepold Farms, a family farm near a small town not far from Portland, for the majority of their berry needs. In this partnership, Burgerville saw a chance to both obtain local foods and also reinforce its social values. Liepold produced high quality berries, of course, but in addition they also treated their farm workers with uncommon care. Liepold Farms special attention to their workers added costs most farms avoided, meaning that while the farm was socially responsible it was also financially fragile. Graves saw congruence to Burgerville’s values with those of Liepold Farms, specifically as they related to the treatment of workers employed on the farm.

Farm workers’ rights, always an interest of Burgerville, have also become an important food system issue for consumers. Burgerville saw, with Liepold, an opportunity to address the issue of farmer workers’ rights, and to support a local family farm. Liepold Farms set themselves apart from many of the other local berry farmers by providing good housing for their employees on the farm-site – they house up to 70 employees on their farm during peak season. As an indicator of the worker satisfaction with Liepold, for example, for the past 20 years the same families have returned to work on the farm. Liepold Farms developed relationships with their workers by paying them a fair wage, providing housing, and taking care of additional medical expenses. This is exactly the type of employee treatment that Burgerville looks for when selecting a supplier, reflecting the way that Burgerville treats its own employees. Liepold Farms’ values represent the values that embody the Burgerville brand.

Once Burgerville made the decision to partner with Liepold Farms, they helped the farm to become completely integrated in a system of distribution through Sysco Corporation. By bringing Liepold Farms into a larger supply chain, Burgerville now gets regular deliveries of fresh Liepold strawberries and raspberries, making a significant financial difference to the farm. Fresh berries sell at a 100 percent premium over frozen berries, which is the way most Oregon strawberries must be sold. By having a partnership with Burgerville, Liepold can be confident that they can keep taking care of their workers while still making a profit on the farm. Their products are also now available to all of Sysco’s clients, giving Liepold an enormous opportunity for future sales growth. Mr Liepold says “if it wasn’t for Burgerville and the fresh mar- ket, [we] probably wouldn’t be doing what [we] are doing now.” If their customers were only buying less expensive frozen berries, Liepold Farms would not exist as it does, and Burgerville would likely not have this kind of partner vendor to provide fresh, local berries.

Current sourcing issue

American chicken farmers annually raise roughly 35 billion pounds of chicken. To generate this level of productivity, farmers have a number of options for raising their animals including conventional methods, pasture-raised methods, and organic methods. By far, the most widespread method of raising chickens for meat is the conventional method. This production method holds the birds in large climate-controlled production houses where they are fed, watered and regularly given antibiotics. These chickens are generally alive for six weeks before slaughter. This method produces the most meat at the cheapest price.

The real cost of this method of chicken production includes social and environmental costs, however. The crowded production houses create conditions highly conducive to disease. To combat this, antibiotics are systematically administered to chickens in their feed, injected into young chicks, and injected into eggs prior to hatching. While antibiotics help to alleviate the problem of disease, they result in additional problems. In 1995, the US Food and Drug Administration (FDA) approved a class of antibiotics, called fluoroquinolones, for use in poultry. Five years later, fluoroquinolones were banned in agriculture, citing evidence that human resistance to the drug had risen since their FDA approval, which could lead to further health problems in humans.xvii The use of antibiotics also creates problems downstream of the farm as up to 75% of antibiotics can pass through an animal undigested, enter water reservoirs, and potentially impact humans or other animals.xviii The perennial use of antibiotics in commercial production houses develops an environment where resistant bacteria evolve. Over time, chickens come into con- tact with the more resilient bacteria, which then pass through as processed poultry, and are consumed by humans. If antibiotic resistant bacteria later infect humans or livestock, the primary courses of treatment are unlikely to be effective and poten- tially lead to health complications.

The most prevalent alternative to production houses is pasture-raised chicken farming, a special case of free-range chicken production. Jack knows that the free- range designation is difficult to interpret as, in the United States, access to the outside is all that is needed to qualify a chicken as being free-range. In many cases, the difference between conventional production and free-range production is that a densely packed production house has an open door at one end. One reason that Burgerville supports certifications such as Food Alliance is that the certification provides more information about the conditions of the animals as they are raised.

Pasture-raised chickens are permitted to roam freely outside, similar to the way cattle are allowed to graze at pasture. This requires a lower animal density and reduces the need for antibiotics. Animals that do get sick while being pasture- raised can be treated with medications, but rarely undergo prophylactic drug therapies to ensure growth. Pasture-raised chickens need more time to grow and gain weight and normally live for eight weeks before slaughter. Since chickens are allowed to roam outside, they are, however, more vulnerable than conventionally raised hens. Production houses are protected from birds of prey, foxes, raccoons, and other predators but chickens venturing out of coops may be susceptible to predators. While farmers keep birds inside during periods of inclement weather, sudden weather changes may catch the birds outside and leave them vulnerable to drowning. Parasitic worms that live in the soil can also infect the birds, another condition uncommon in production houses.

Certified Organic farming further restricts the farm’s operations by mandating that all food given to the birds be free of genetically modified feed and organically farmed. Restrictions are also placed on beak-trimming and claw modifications, which are procedures done to prevent hens from eating their own eggs and hurting other chickens. In order to sell poultry as USDA Organic, it must be certified by a USDA approved, third-party certifier.

Burgerville and chicken

Burgerville offers six menu items with fried or grilled chicken and spent over a million dollars on chicken in 2009. Jack Graves wondered if Burgerville should consider changing the source of its chicken to increase its local purchasing quotient. A large regional supplier would be able to supply Burgerville with the quantity of chicken it needs from its processing plants in Washington and Oregon, but these were conven- tional producers with the social, environmental, and animal treatment problems. Purchasing locally could support smaller local farmers, keeping more of the money within the local communities. The economic impact of this quantity of purchases could have a significant impact on the farms and communities where the pur- chases are made. An economic impact study of poultry production indicates that every $1 million of sales by a poultry or egg producer generates 20.1 FTE (full-time equivalent) jobs. A problem with many of the smaller farms, however, is they lack the ability to supply sufficient numbers of consistently sized portions. Jack recalled an attempt a few years ago to source chicken locally, and the variation in portion sizes caused considerable consumer backlash and excess waste. At this time there is no local farm using non-conventional production processes that can dependably provide the quantity of high-quality chicken that Burgerville needs.

Coleman Natural, a chicken supplier from Colorado is currently under consideration by Jack and his supply chain team. Burgerville has been testing Coleman’s product with good results in a few restaurants. Coleman Natural supplies some organic and antibiotic-free chicken and may choose to earn the first Food Alliance certification for at least some of its poultry meat. The chickens themselves will be sourced from the Southern United States, however, as Coleman’s processor capable of providing a dependable supply of consistently sized portions is based in Georgia. While this supplier offers some sustainably raised chickens, there is an additional environmental impact that Burgerville would incur for their products, in the form of emissions related to the necessary transportation and storage of chickens to restaurant locations. And of course, purchasing from the South is not really very local. Since Coleman may choose to obtain Food Alliance certification, Jack could see that partnering with Burgerville might provide the impetus to actually make the move to certification. It would be good to see Food Alliance expand its reach into the South, where its impact could be significant.

Jack Graves can see that, regardless of his decision, some of Burgerville’s values will be served better than others, and he has a number of alternatives to choose from. Continuing to buy conventionally produced chicken is affordable, but has a long list of negative connotations and misalignments with Burgerville’s values. Developing relationships to incentivize individual local farmers to produce sustainable chicken, while appealing on its face, is costly, risky, and slow. Importing chicken from the South violates the desire to buy local, increases food miles, and relies on third parties to monitor the supplier. The task at hand for Jack Graves is to put together a recommendation that best fits as many of Burgerville’s core values as possible. In a few days, the supply chain team will meet to make the chicken sourcing decision, and Jack wants to have thought these issues through before the meeting.

What should Jack do?

Image credit: Burgerville