Two related stories—both involving the Denny’s restaurant chain—from last week show how difficult it is for organizations to polish tarnished reputations, particularly when their reputations have been damaged by perceived cultural decay.
Denny’s experienced a public relations meltdown in 1994, following what appeared to be systemic disrespect for African-American consumers. Separate incidents in San Diego (involving the local NAACP chapter) and Annapolis (Secret Service agents) contributed to the impression that Denny’s discriminated against black customers.
Flagstar, Denny’s parent company, initially characterized the two incidents and isolated examples of poor judgment, but as thousands of complaints flooded in and employees told reporters of store policies designed to keep African-American customers to a minimum, the chain was forced to recognize a cultural problem. It launched a massive employee communications campaign—accompanied by television ads that were half-apologetic half-promise to do better—to repair the damage.
Until this week, it appeared that the Denny’s effort had been a success—at least if the objective was to keep the company’s name out of the papers.
The first clue that the issue had not yet gone away came when Denny’s announced that it was launching a $2 million anti-racism ad campaign. The company has been working with both the NAACP and the Hispanic Association on Corporate Responsibility to increase the number of minority-owned restaurants. In 1997, the NAACP awarded Denny's its annual minority business development award for its efforts to provider broader opportunities for minorities.
“What we’re trying to do through all the lessons we have learned—obviously difficult lessons—is to get people to talk about race,' said Jim Adamson, chief executive of Denny's parent company, now known as Advantica Restaurant Group.
“There are some people who never notice another person’s color. But most of us do,” says a black youth in one ad. “And that’s okay. Don’t feel guilty. Noticing a person’s color doesn’t make you racist. Acting like it matters does.” The ads all conclude with the tagline, “Diversity. It’s about all of us.”
Denny’s apparent acknowledgment that it still has an image problem in minority communities was followed by a far harsher indication that the discrimination issue continues to haunt the company. A day after it announced the ad campaign, Denny’s was slapped with another lawsuit, this one accusing employees at a San Jose restaurant of making a group of 17 people, all but one of whom is Hispanic, wait as other patrons were seated. When the patrons complained they were refused service, and eventually the police were summoned to have them ejected.
It is worth pointing out that Denny’s is not the only restaurant chain to have experienced this kind of problem. Shortly before the holiday season, Wendy’s was labeled “the most racist corporation in America” and activists accused the chain of discrimination against African-American franchisees. That story died quickly, but the Denny’s charges are likely to have more staying power, if only because of the company’s track record.
It is also worth pointing out that media reports of the latest charges against Denny’s suggest that while the customers may have been passed over, their response might have been disproportionate to the offense. Given the climate of litigiousness that exists in America today, one wonders whether this incident would have sparked a lawsuit had a restaurant with a better record—or shallower pockets—been involved.
Still, that question makes it clear that Denny’s reputational woes continue to create problems. Companies that are found guilty in the court of public opinion clearly have a hard—and often expensive—time convincing a skeptical public that they have reformed.