Denny’s and Customer Service Early on the morning of April 1, 1993, 21 members of the U.S. Secret Service arrived in Annapolis, Maryland, to prepare for President Bill Clinton’s speech at the U.S. Naval Academy later that day. Before setting up security at the academy, the contingent, in full uniform, went to a local Denny’s restaurant for breakfast. The group included six African American agents who sat at a table together, and an African American supervisor who, with the white agents, sat at other tables. After all the agents had ordered, the six black agents realized that the white agents and their supervisor had been served while they had not. Agent Robin Thompson went to ask the waitress about the order, and she said it was on its way. He then asked to talk with the manager and was told that the manager was on the phone. (White agents seated at other tables later reported that the waitress rolled her eyes after turning to leave the black agents’ table.) After having waited an hour, the agents stood to leave, and only then, they said, were they offered a single tray of food. They refused the food because there was no time to eat. “We had to go to a Roy Rogers (a local fast-food restaurant) and eat in the van,” said one of the African American agents. Seven weeks after the incident, the six agents filed a lawsuit seeking unspecified monetary and punitive damages. The suit alleged that their civil rights had been violated because Denny’s had denied them service because of their race. “It’s a classic case of some kind of bias,” Thompson said. The lawsuit immediately attracted nationwide media coverage. On the CBS Evening News Dan Rather summarized the incident by saying that the agents “put their lives on the line every day, but they can’t get served at a Denny’s.” Denny’s, a unit of Flagstar, Inc., was a nationwide chain operating 1,487 restaurants throughout the United States. Flagstar was formed in 1989 when Coniston Partners headed a leveraged buyout of TW Services. In 1992 Kohlberg, Kravis, Roberts & Company paid $300 million for a 47 percent interest in the highly leveraged Flagstar. Approximately 70 percent of the Denny’s restaurants were owned by Flagstar and the rest were owned by franchisees. In contrast to fast-food chains such as McDonald’s and Burger King, Denny’s operated sit-down restaurants, so when a restaurant became crowded, customers did not wait in lines but instead waited to be seated, order, and served. In response to the agents’ charges, Flagstar ordered an investigation of the incident. After questioning employees at the restaurant the day after the lawsuit was filed, the company fired the manager of the restaurant for failure to report the episode. Flagstar officials also defended their employees’ actions. Steve McManus, a senior vice president who had questioned employees at the Annapolis restaurant, said the delay in the agents’ service was caused by the size of their party and the complexity of their orders, which caused a backlog in the kitchen. The black agents were most affected by the delay because their table was the last to order. He said, “It’s a service issue, not a discriminatory issue.” In response, the agents said a group of white customers entered the restaurant after them, ordered, and was served while the agents waited. Flagstar CEO Jerome J. Richardson said, “We had one cook, and either two or three servers to serve the entire restaurant. If they say they were discriminated against, I apologize. But in my opinion, there was not an intent to not serve black people.”20 The Annapolis incident was neither the beginning nor the end of Denny’s troubles. “It’s 1993 and certain things should not be happening. I just cannot imagine them not wanting to serve those children,” said Randy Shepard, director of the allblack Martin Luther King All Children’s Choir of Virginia. Shepard was referring to a June 1993 incident in which 70 children and 54 adults were returning home by bus to Raleigh, North Carolina, after weekend performances in the Washington, D.C., area and were allegedly refused service at two Denny’s restaurants. According to Shepard, the group first went to a Shoney’s restaurant off Interstate 95 in Woodbridge, Virginia. “The manager there said he would be glad to accommodate us, but there was only 20 minutes before they closed, and service would take a long time,” Shepard said. “He suggested we go to Denny’s down the street.” The three buses then stopped at a Denny’s outside Dale City, Virginia, about 11:00 p.m. Shepard said he entered the restaurant and asked a manager if he could accommodate the group. “He said he couldn’t accommodate us because he didn’t have the staff and recommended a larger Denny’s the next exit down.” At the second Denny’s, Shepard said the manager met him in the parking lot and also told him he could not accommodate the group. “Some of the children had gone in to use the bathroom, so I went to get them,” Shepard said. He added that the restaurant did not seem full, and “they seemed like they had ample enough staff around, and it appeared they had already started clearing tables to serve us.” Prince William County Supervisor John Jenkins, whose district included one of the two Denny’s restaurants, commented: “I feel like they ought to close that chain down. They have an interstate service route and ought to have enough help to serve those customers.” Jenkins called for a county investigation of the incident. Denny’s officials and employees disputed many of Shepard’s claims. “Our restaurant can’t handle that kind of crowd—not with just two cooks and four servers. And I’m not prejudiced,” said waitress Kimberly Marshall, who was white. However, her husband Dennis Marshall, an African American, said “If you’re open for business, you can’t say you can’t serve that many people. It doesn’t make sense to me.”21 Denny’s officials said that the first restaurant was full, the second was half full, and the bus driver had “indicated the group outside was in a hurry.” Furthermore, a company spokesman stated that “in both Denny’s restaurants, we offered to serve the large group and indicated there would be a lengthy wait,” but the group left before the restaurant could serve them. Denny’s officials stated that they were not equipped to serve 130 people with a staff appropriate for the off-peak time of 11:00 p.m. The officials acknowledged that the manager at the first Denny’s suggested that the group try the other restaurant, but added that “he offered to phone the other restaurant to make the arrangements.” Coleman Sullivan, vice president of communications of Flagstar, said, “It was 11:00 p.m. on a Sunday, and our manager told this bus group it would take a while to serve them. There was no discrimination.”22 Eighteen months before the Annapolis incident, the Department of Justice (DOJ) had initiated an investigation of the Denny’s chain in response to complaints from African American customers in California. After the investigation substantiated allegations of bias, Denny’s and the DOJ entered into negotiations to settle the complaints. The complainants also took other action. Their lawyers had earlier established a toll-free number to encourage others to report racist episodes so they could qualify a class action suit.23 On March 24, 1993, a group of 32 African American customers filed a class action civil suit in San Jose alleging several discriminatory practices, including the following: • A group of 18 African American college students was forced to pay a cover charge of $2 each and pay for their meals in advance at a Denny’s restaurant in San Jose, California, while six white students acquainted with one of the African American students were seated at a nearby table and were not required to pay the cover charge or pay in advance for their meals. According to the company, several Denny’s restaurants had in the past implemented a “late night policy” requiring all groups of 10 or more to prepay for meals after 10 p.m. as a “security measure” to thwart the rising theft of meals, and the policy had “not been enforced in a discriminatory fashion.” • A racially mixed couple, Danny and Susan Thompson, took their three children to a Denny’s restaurant in Vallejo, California, to celebrate their daughter Rachel’s 13th birthday. According to the lawsuit, Denny’s refused to serve Rachel their famous free birthday meal, despite the fact that she had both her baptismal certificate and school identification. “I felt violated, humiliated, and embarrassed, so we didn’t eat there. I can’t adequately describe the pain that you feel to see this happen to your child,” Mrs. Thompson said. • Denny’s allegedly threatened or forcibly removed African American customers from several California restaurants. • Denny’s employed “a general policy of limiting black customers,” using the term “blackout” to signal employees when too many blacks were in a restaurant. The suit also alleged that one district manager instructed store managers to “start cracking down and get rid of some of those blackouts.” Some Denny’s managers asked for prepayment of meals or told blacks that the restaurant would be closing soon. • When an employee at a Denny’s restaurant in San Jose, California, told a manager a customer’s eggs needed to be recooked, he was told to “take it to the niggers, and if they have a complaint, tell them to come see me.” The class action lawsuit came only 5 months after a $105  million settlement of an employment discrimination suit against Shoney’s, Inc., another leading national restaurant chain, that alleged that the company limited the number of African American employees at each location and restricted them to kitchen jobs by blackening the o in the word Shoney’s on the job application to indicate an applicant was an African American. Lawyers for Saperstein, Mayeda, Larkin & Goldstein, the law firm that represented the plaintiffs in the Shoney’s case and was currently negotiating for the plaintiffs in the Denny’s lawsuit, commented that the Denny’s case might be more remarkable because it dealt with mistreatment of the most important element of any business, the customer. “These practices evoke the bald racism of the 1950s,” the lawyers said in a statement. Former California Supreme Court Justice Cruz Reynoso, who had been recalled by California voters and was now a law professor at the University of California at Los Angeles, said he believed the Denny’s case was the first “pattern and practice” racism case in the past 15 or 20 years involving a major public accommodation. The service in a restaurant depended on a variety of factors, including Denny’s policies, the practices of the restaurant managers, and the individual employees of the restaurant. The problem for Flagstar was twofold. First, although the company encouraged Denny’s franchises to end practices that might be discriminatory, there was a limit to the control the company could exercise over the privately owned outlets. Second, the application of existing policies was problematic because policies intended to apply to all customers might instead be applied in a discriminatory fashion at individual locations by individual managers or employees. While the negotiations with the DOJ were under way, Denny’s addressed some of the issues by apologizing to customers, firing or transferring “bad-apple” employees, and creating a cultural diversity team. The “late night policy,” which had been instituted to prevent diners from walking out without paying, was discontinued at all the chain’s restaurants, both company owned and franchised. Mr. Richardson said, “The managers had problems with customers walking out on checks. Some required prepayment, which can be a problem when it’s not applied to everyone.”24 In addition, Flagstar initiated meetings with civil rights groups. Complicating the situation, Mr. Richardson, a former wide receiver for the Baltimore Colts who had started with a single hamburger restaurant in Spartansburg, South Carolina, had for 6 years been working to obtain one of the two National Football League franchises to be awarded in the fall of 1993. Denny’s and Mr. Richardson had been criticized by the Reverend Jesse Jackson and his son, who headed the Rainbow Coalition. The younger Mr. Jackson had asked in a May 27 press release, “Are we seeing the beginning of a racist sports connection and pattern here?”25 ■ Preparation Questions 1. What were the causes of the individual incidents at the Denny’s restaurants? Were they more than incidents of bad service? What might they reflect? How serious are they? 2. What responsibilities does Flagstar have with regard to the incidents? 3. What roles have the media and plaintiffs’ attorneys played in this issue?