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?
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