Responding to allegations of Racism (in US)

The 1990s have witnessed an increased emphasis on valuing diversity. With both the market place and the work force becoming more and more diverse, many managers have redesigned their companies’ cultures to reflect and encourage multiculturalism. Changing a company’s culture, however, is often more difficult than managers might first believe. At Denny’s for example promoting multiculturalism required a reworking of its corporate culture from top to bottom.

In the early 1990s, Denny’s found itself the target of numerous allegations of racism, by both customers and employees. Black customers asserted that they were not receiving the same treatment at Denny’s as white customers. Some complained that they were either forced to wait for their food longer than white customers or denied service entirely; others said that they were forced to pre-pay for their meals while white customers in the restaurant were not. There were also allegations that Denny’s engaged in “Blackouts” where Denny’s restaurants would close if there were too many black customers. In addition, Denny’s was accused of discriminatory hiring practices as well as preventing blacks and other minorities from reaching management and franchise positions. None of this garnered much attention however, until a suit was filed on March 24, 1993, by a group of minority customer in San Jose, California who made the all too familiar allegation that Denny’s had required cover charges and pre-payment of meals from minority customers, but not from white customers.

In response to these charges, Denny’s parent company, Flagstar formally apologized to the customers, and Flagstar CEO Jerry Richardson dropped the cover charge and pre-payment policies and explained that they had been intended to prevent late night “dine and dash” theft and that any discriminatory implementation of them was in direct violation of corporate policies. Richardson admitted however, that he had been unaware that the cover charge and pre-payment policies even existed within the company. Furthermore, Richardson began talks with civil rights groups such as the NAACP. Flagstar also signed a consent decree issued by the Justice Department that required spot testing of Denny’s restaurants for discriminatory practices as well as an anti-discrimination training program for all Denny’s staffers. Our company does not tolerate discrimination of any kind, Richardson assured all, and his actions seemed to support his words.

Then, on May 24, 1993 six black Secret Service agents filed suit against Denny’s for allegedly having denied them service at a Denny’s in Annapolis, Maryland. The six men claimed that while they received deliberately slow service, their white counterparts were served in a timely fashion. Hearing the allegations made by six African- American Secret Service agents on national television that they were not treated fairly at Denny’s was a painful experience for our company, Richardson admitted.

The highly publicized suit served as a catalyst that set off a whirlwind of changes throughout Flagstar. In late May Richardson issued an internal memo that marked the beginning of Richardson’s pledge to change: I am distressed that some people in our company have not gotten the message that we will not tolerate unfair treatment of customers, he wrote. The past year has been a trying experience, particularly or many of our African-American employees who are embarrassed by what happened. This is my personal pledge to them to restore their pride in Denny.

Richardson also under took efforts to restore Denny’s reputation as well as his own. At the forefront of his efforts was “The Pledge”. The Pledge was the name given to a 60 second TV spot, which aired in 41 television markets and on the Black Entertainment Television network during a two week period in June 1993. In it, Jerry Richardson and a representative sample of Flagstar’s 46,000 employees endorsed a solemn pledge to treat customers with “respect, dignity and fairness”. The whole idea for the Pledge started with our desire to express support for our own employees, explained David Hurwitt, Flagstar’s senior vice president of marketing. These people have been very much under the gun. We chose television for this special campaign because we felt it was important to show people exactly who the Denny’s employees are. Overall response to “The Pledge” was favorable. Our phone has been ringing off the hook since Denny’s aired this ad, said W Gregory Wims, president of the NAACP in Rockville, Maryland, the largest branch in the Washington DC area. About 90 percent of our members approve of the commercials and the steps Denny’s has been taking to improve relations with people of color.

Experience however had taught Flagstar that mere policy statements do little good in the absence of training and monitoring. With this in mind, Flagstar reaffirmed its commitment to its agreement with the Department of Justice by stepping up its multicultural training programs and agreeing to allow the NAACP to conduct its own inspection of Denny’s restaurants. Denny’s also set up a hot line for employees to use to report possible instances of discrimination. In addition, Flagstar made significant management changes during the summer of 1993 by installing three executives considered particularly sensitive to diversity in the workplace: Norman Hill, Joe Russell, and Ron Petty. Russell was appointed head of the diversity training program, and Hill came on board to oversee field hiring. There are companies that bury their heads in the sand and say, I’m going to conduct my business the same way I’ve always conducted my business, said Petty. And then there are enlightened companies that say. There are opportunities outside of the way we’ve normally done business.

The steps taken by Flagstar have been significant, not only because of the model the company has set for other companies but also because of Flagstar’s own holdings including 530 Hardee’s fast food units, 1,400 Denny’s family restaurants, 200 Quicy’s steak houses, 120 EI Pollo Loco outlets and more than 2,000 Canteen Corp. Food and Recreation Services accounts. The community’s response to the allegations against Denny’s confirm that multiculturalism can no longer be ignored.