Diversity

Denny's

Leading the Way to Diversity

Introduction

Denny's began in 1953 in Lakewood, California. It was originally named Danny's Donuts. Impressive profits lead to menu expanding, name changing, and a franchising program being developed. By 1967 Denny's became an international company by opening a restaurant in Acapulco, Mexico. By the year 1981, over 1000 restaurants strong, Denny's has become the nation's leading family restaurant.

Denny's is the nation's largest full service family restaurant chain, operating more than 1600 restaurants system-wide. Nearly half of Denny's restaurants are franchised owned and operated. In 1997, Denny's ranked tenth out of over 700 franchises in Success Magazine's Franchise Gold 100; it ranked 17th out of 350 franchises in Franchise Time's Top 200 list; and it ranked first in the family restaurant category in Entrepreneur Magazine's Franchise 500, which reviewed 861 franchises.

However, Denny's wasn't ready for the change of time. By 1991 trouble started and top management at Flagstar Companies (now Advantica Restaurant Group, Inc)

(2)

was determined to Contest the lawsuits filed against them. Even as evidence of wrongdoing piled up nationwide, Flagstar CEO Jerry Richardson continued to take the position that very little wrong had been done Richardson answered the question (If our African-American guests were mistreated, was it because of racism?) with the response " I can't tell you. It's impossible to know what's in a person's heart."

Finally Flagstar conceded a defeat and settled the class-action suits, consolidating one of them with a case originally settled in 1993 with the U.S. Government. By December 1995, Denny's had paid out $54 million to some 295,000 customers and their lawyers.

Indeed, in 1993 Denny's sales declined. The predicament that occurred is a perfect example of a bad situation that became worse before it could become better. The racism at Denny's was ugly because racism is always ugly. It is hard to believe that even in the 1990's things like this happen. Also, the way Denny's handled the situation was ugly: it took multi-million dollar lawsuits to make Denny's change it ways.

Cultural Management

Denny's is America's largest full-service family restaurant chain. It is the most recognized brand in family dining and

(3)

serves over one million customers every day. Known for 24-hour service and signature breakfast items, Denny's is a shining example of a great diversity program in action not just on paper. As Denny's states, "It is our strong belief that America's diversity is one of its greatest assets in a global economy. At Denny's, we continue to find diversity to be a rich source of ideas, creativity, and innovation." These are just words however, but the numbers of minorities, meaning women and people of color, at Denny's speak louder. The Board of Directors at Denny's is composed of 50% minorities, and the Senior Management Committee has slightly more with 54%. forty-seven percent of management positions are held by minorities, and 46% of franchised stores are owned by minorities. Contracts to purchase necessary items from minority suppliers are at a fairly low percentage, however, at fifteen.

While these numbers speak highly of diversity at Denny's, the numbers weren't always that high. Denny's had several problems in the 1990's, many lawsuits were filed, and many

(4)

people were emotionally scarred because of discrimination in the restaurants.

Lawsuits

One episode of discrimination was alleged by six black Secret Service agents that decided to go out to eat as part of a 21-member, Secret Service group, in their hour-long break, before getting ready for President Clinton's speech. While they all ordered in succession, the black agents, who sat at a separate table, noticed that the other table had already gotten their food, as well as customers that had entered after them. When they asked the waitress where their meals were, she shrugged it off and rolled her eyes while turning away to help the table full of white officers. The black men were finally offered food, after several complaints, while they were standing to leave. By this time, they did not have a chance to eat and had to grab something on the way to the speech.

A more severe case of discrimination at Denny's happened to a group of ten Syracuse University students: six Asians,

(5)

three blacks, and one white. While they waited patiently 30 minutes for a table, many other white customers were seated, finally when they complained about the 30 minute wait they

Was thrown out of the building by two sheriff's deputies working as security guards. Once in the parking lot, a shoving match broke out between the guards and the Asian and black students. During this confrontation, several white customers came out of the restaurant and began calling the students names, jeering them, and even physically attacking them. Two of the female students were even knocked unconscious in the ordeal. When one of the black male students came to one of the female aid, one of the guards pepper sprayed him and when another female came to help, they pushed her to the ground and kicked her repeatedly in the head. Finally two black bystanders helped the students, against orders of the guards that they would pepper spray anyone helping the victims. Afterwards, they were denied the right to file a complaint because the group of white customers claimed they had started

(6)

the fight and the security guards claimed they were all intoxicated at the time.

Yet another case of discrimination occurred on Rachael Thompson's 13th birthday. Rachael and her family, half

Samoan, half black, decided to go to Denny's for her special birthday meal. At this time, Denny's offered a free birthday meal with proof of date of birth. After Rachael and her family ordered,