Marketing Management: Guess Who's Coming to Denny's

Marketing Management

Case Study

Guess Who's Coming to Denny's

Few allegations are more damaging to a company's reputation than charges of racism.
When systematic racism is revealed in the ranks, strong- and often momentarily painful remedial action must be taken. This is precisely what Denny's restaurants did to the tune of $54 million in the spring of 1994.

Denny's was vilified as a symbol of racial discrimination. But in the years immediately following the company's embarrassing and painful publicity, Denny's became a model of progressive diversity.

PAINFUL BREAKFAST AT DENNY'S

With more than 1,500 company and franchise restaurants located throughout the United States, Denny's is the nation's largest full service family restaurant chain. On April Fool's Day 1993, 21 members of the Secret Service, preparing for a Naval Academy visit President Clinton, stopped for breakfast at Denny's outside Annapolis, Maryland.
Fifteen of the officers were served quickly, but one table of six uniformed me all black never received the food they had ordered. As it turned out, although their food was ready for a full 20 minutes, neither the waitress nor her manager felt compelled to serve the black agents until they got around to it.

The officer's subsequent discrimination suit unleashed a tidal wave damning national publicity and legal actions against the 43 year old company. Dan Rather summarized the situation on the CBS News These agents" put their lives on the line every day, but the can't get served at Denny's"

Denny's paid $54 million to settle all suits and adopted a far reaching affirmative action program to hire minority managers, recruit minority franchise owners, and roust out racist in its ranks.

LESSON LEARNED

"All of us at Denny's regret any mistake made in the past," said C. Ronald Petty, president and CEO, when Denny's announced its settlement

"Our company policy is clear and simple: if employees discriminate, they will be fired. If franchisees discriminate, they will lose their franchises."

After the flare up, Denny's worked at becoming "a model in the industry" It recruited an African American woman to join its parent company board of directors. It promoted minorities to supervisory positions, and it introduced a "Fast Track" program to help prepare minority candidates for restaurant ownership. In 1993, there was only one Denny's restaurant owned by an African American. By 1995, the number had risen to 26, with plans to reach 65 within 2 years.

Said Karen Randall, public relations director of Denny's new parent Advantica Restaurant Group, "We decided to look inside the organization and focus on "substance" and change our makeup and management philosophy and the way we serve our customer base. In just a few years, this effort has changes the company."

DIVERSITY ROLE MODEL

When Advantica CEO Jim Adamson took Denny's in 1995, he made no secret of his intent. "I am a complete supporter of affirmative action because I don't believe the playing field is level. "To ensure that a diverse slate of candidates is presented for every senior Advantica job, Adamson employs minority owned search firms in addition to more traditional companies.
In 1992, there were no Asians, Blacks or Latinos in top corporate management and only one minority on the company's board. Today, minorities account for a third of its directors. Nearly one of three Advantica officers and managers are minorities.

Purchases from minority suppliers accounted for less than $2 million in 1989. By 1997, that number had increased to more than $36 million. IN terms of franchises, minorities own 35% of the 737 franchised restaurants. An African American, Akin Olajuwan is the company's second largest franchisee.

The company's chief diversity training sessions, specifically geared toward serving customers and managing Denny's restaurants. Managers are required to attend two day sessions to learn how to communicate to their employees about diversity issues and to better meet the needs of customers.

Has it worked? Well, 60 minutes was impressed enough to give Denny's glowing marks in 1999. And Fortune magazine, in compiling its "50 Best Companies for Asians, Blacks and Hispanics" in 1998, ranked Denny's first in contributions to minority organizations, second in spending with minority vendors, and second in overall diversity consciousness.
It was indeed a miraculous turnaround

QUESTIONS

1. Should Denny's have capitulated so quickly to charges of racism in its restaurants?
2. How would you assess the company's response to the accusations?
3. How wise was Denny's to appoint a chief diversity officer?
4. With Denny's now has proven itself relative to diversity efforts, can it feel free to devote less resources to the effort?