Copyright ©2009 Pearson Education, Inc. Publishing as Prentice Hall 5-1 Denny’s Restaurants Creating a Diverse Corporate Culture

Copyright ©2009 Pearson Education, Inc. Publishing as Prentice Hall

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Denny’s Restaurants

Creating a Diverse

Corporate Culture


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Overview

• Key Events.

• Company History.

• CEOs on Diversity.

• Stakeholders.

• Critical Issues.

• Outcomes.

• Challenges


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What Happened?

• April 1, 1993: Six African-American U.S. Secret Service agents are refused service, while 15 fellow agents are being served second helpings.

“I didn’t want to believe it was discrimination.

But I couldn’t think of what else it could be.”

• The six U.S. Secret Service agents file a class action lawsuit against Denny’s Restaurants.


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What Happened?

• Similar class action lawsuit is filed in California, where young African-Americans are asked to pre-pay before being served their meals.

• Denny’s becomes “a poster child for racism.”

• Law firms urge victims to contact them.

• December 1995: Denny’s pays out $54M to 294,000 customers and their lawyers.


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Company Timeline

• 1963: Jerry Richardson and Charles Bradshaw form a partnership to operate a Hardee’s franchise in Spartanburg, SC.

• 1969: Spartan Food Systems.

• 1979: TransWorld Corporation.

• 1986: TW Services.


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Company Timeline

• 1987: TW Services buys Denny’s and El Pollo Loco.

• 1989: Company acquires huge debt due to hostile takeover.

• 1992: KKR invests $300M, the company is renamed Flagstar Companies.


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CEOs on Diversity

• Jerry Richardson– “I’m sure you’re right about us being behind

on diversity, but I never thought about it.”

• Jim Adamson– “We’re going to treat each other with dignity.

If you don’t like the way the train is going, get off.”


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Racism Within Flagstar

• No deliberate corporate policy advocating discrimination,

but discriminatory practices were widespread and well

known throughout the company.

• Restaurant managers’ policies included:

– Asking for identification;

– Requests for prepaying meals;

– “Blackouts,” or locking out minority customers.

• Non-existent relationships with minority vendors.


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Jim Adamson

• Grew up in a racially-mixed environment on U.S. Army posts.

• CEO Burger King.• Henry Kravis hired

him to replace Jerry Richardson as Flagstar CEO in 1995.


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Critical Issues

• Change of control in parent company.

• Role of a transformational leader.

• Managing rapid cultural change.

• Working with organizations hostile to your own.

• Role of news media.

• Dealing with racial discrimination.


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Key Stakeholders

• Employees

• Customers

• Kohlberg, Kravis, Roberts

and Company

• Restaurant managers

• Minority Community


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How should Jim Adamson proceed as the new CEO?


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Adamson’s Initiatives

• Adamson hired Ron Petty, former head of Burger King USA, as CEO of Denny’s to manage the chain’s transformation.

• Committed to making the company “a better place for women and minorities.”


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• Adamson also hired Ray Hood-Phillips to help develop a diversity program that would make Denny’s and Advantica less vulnerable to charges of racism and discrimination.


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• The CEO becomes a champion for change.• Business unit chiefs “get it.”• New Vice President for Diversity position.• Diversity training throughout the company.• New minority supplier contracts.• Aggressive minority franchising, hiring.• Regular, standardized performance evaluations.


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• More women, African-American, Hispanic, and

Asian managers.

• Diversity becomes a performance criterion.

• More local authority, empowerment.

• Never miss an opportunity to preach the gospel of

diversity.


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Symbolic changes included a declaration that Martin Luther King’s birthday would be a company holiday.


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Results

Videotaped examples of publicity, both before Jim Adamson’s initiatives and after.

Several examples of Denny’s nationwide television advertising campaign.


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Results

• 49% of the workforce are people of color.

• 33% of the officers and management are

people of color.

• 27% of senior management are women and

people of color.


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Results

• Of Denny’s 823 franchise owners, 309 of them are

people of color.

• In 1992, the company’s supplier base did not

include a single minority contract. Today, 20% of

Advantica’s contracts are with minority suppliers

of goods and services, valued at $120m annually.


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Results

• Jim Adamson was named “CEO of the

Year” by the NAACP in 1996.

• Advantica rose to #1 on Fortune

magazine’s list of “Best Companies for

Minorities” in 2000 and again in 2001.


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Next Steps

Improve the company’s financial performance• Better numbers against key competitors in both fast food

and casual dining restaurant chains.

• Lower debt load.

Continue the fight against racism• Continue to change corporate culture.

• Continue to expand opportunities for people of color at all levels within the company.


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CreditsA Notre Dame case study produced by research assistants M. Jennifer Abes,

W. Brent Chism, and Thomas F. Sheeran under the direction of Professor J. S. O’Rourke, IV.

Power Point to accompany Opportunities and Challenges of Workplace Diversity: Theory, Cases, and Exercises by Kathryn A. Cañas and

Harris Sondak.


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Documents

Copyright ©2009 Pearson Education, Inc. Publishing as Prentice Hall 5-1 Denny’s Restaurants Creating a Diverse Corporate Culture