Crisis Communication Strategies


Statement of Problem

Literature Review

Communication Theories


Jack in the Box
Union Carbide


Reference List

Team Members

Case Study: Denny's Class Action Lawsuit

This is a case study of a major restaurant chain that faced a crisis as a result of race discrimination against its customers practiced by several employees of the chain. The first act of discrimination came December 31, 1991, when 18 youths visited a Denny's restaurant in San Jose, Calif., and claimed racially discriminatory application of a late-night pre-payment procedure (Chin, Naidu, Ringel, & Snipes, 1998). Essentially, because the youth were African-American and it was late at night, they were asked to pay their bill before they could be served.

Almost immediately the company worked with the NAACP to learn how the company could improve in areas of diversity, resulting in a "fair share" agreement. Denny's representatives met with NAACP representatives and legal representatives of the youths to resolve the youths' concerns. Denny's agreed to immediately suspend pre-payment procedures in San Jose and to review its practices at other Denny's restaurants around the country.

Although Denny's received negative press coverage because of this incident, the crisis soon passed. It didn't grow into a major crisis until a more highly publicized incident occurred 2 years later in a Denny's restaurant in Annapolis, Md. May 24, 1993, six members of the uniformed division of the U.S. Secret Service filed suit against Denny's, claiming racial discrimination when they were trying to receive service April 1 of that year (Chin et al., 1998). Less than a week after signing an agreement with the youth in the 1991 incident, a waitress at the Denny's restaurant in Annapolis refused to serve breakfast to 6 black Secret Service agents. This set the stage for a full fledged public relations disaster.

Primary Evidence. March 25, 1993, Denny's issued a press release (Chin et al, 1998) stating the chain reached an agreement with the U.S. Department of Justice to communicate and reinforce the restaurant's policies regarding the equitable treatment of all customers, regardless of race or color. This release was in response to the discriminatory act in San Jose. The agreement focused primarily on actions to be taken at California restaurants. The procedure to ask customers to pay in advanced was eliminated as a result of the agreement. In the press release, Jerome Richardson, chairman and chief executive officer of TW Services, Inc., parent company of Denny's, said "Our agreement with the Justice Department is an affirmation of our commitment to treating all customers fairly and we intend to go even further with our own programs.

Our company does not tolerate discrimination of any kind. Any time evidence of such behavior is brought to our attention, we investigate and appropriate disciplinary action is taken." (Denny's, 1993a, p. 2). Also as part of the agreement, Denny's developed a plan to communicate its stance against discrimination to its employees. This plan included special video training programs for all Denny's employees, public notification of Denny's non-discrimination policies, as well as the hiring of an administrator to keep records of the plan and its progress. The plan also called for seeking ways to enhance opportunities for minorities in hiring, promotion and franchising. Finally, the plan called for diversity and sensitivity training for company leadership.

In conjunction with the press release, Denny's issued an open letter to Denny's customers and communities. The letter was posted near the cash registers of all Denny's restaurants. The letter, signed by Richardson, declared "we want to make it clear to all of our valued customers that Denny's does not and will not tolerate discrimination of any kind" (Denny's, 1993b, p. 1).

In addition to this pledge, the letter acknowledged problems in the California restaurants but denied any pattern of discriminatory behavior at its restaurants. The letter also pledged to terminate any employees engaged in discriminatory acts against its customers. It concludes by giving customers a toll free number to call if they have questions or comments.
Taking such an active stance against discrimination, company officials felt they had put a stop to the potential disaster.

However, it was only one week later that the second major incident took place at the Denny's restaurant in Maryland. The Maryland incident couldn't have been worse timing for the company. It appeared that Denny's wasn't taking its own policies seriously. It appeared the company was reneging on its antidiscrimination pledge.

Immediately, the company issued an internal memo to all of its employees. Again, the front man was chief executive officer Richardson. The memo encouraged employees to call a special telephone line established by the company to report any other incidents of discrimination. Richardson stated "I am distressed that some people in our company haven't gotten the message that we will not tolerate unfair treatment of customer" (Denny's, 1993c, p. 1).

In addition to the firm message contained in the memo, it also addressed the greater majority of hard working employees who do not practice discrimination and support the company's policies. In the memo, Richardson also stated "We know that those of you who work in our restaurants have a difficult job. We are here to support you" (Denny's, 1993c, p. 1). The letter singled out Denny's African-American employees by acknowledging the difficult position they have been placed in due to the transgressions of a few.

Chin et al. (1998) cites Denny's (1993) television commercial, which highlights a corporate pledge that was signed by all Denny's employees to support the anti-discriminatory policy. The commercial features Richardson and several employees, each repeating different lines of Denny's pledge. A voice over in the commercial states "All of us at Denny's want you to know that we care about your feelings, which is why all 46,000 of us have signed this pledge and reaffirm our commitment to you" (Chin et al., 1998, p. 185).
Advantica, now Denny's parent company, has many articles of evidence of its anti-discriminatory policy.

Under its diversity programs web page (2002), it has four subtopics: initiatives, philanthropy, awards, and "what's new." Its initiatives Web page claims that acquisition boards consist of 11 directors, of which 36 percent are women and people of color. It also states that several of the members of the Advantica Board of Directors are minority members. Advantica's philanthropic page shows evidence that the company supports several charities that focus on minorities, such as Save the Children and the National Civil Rights Museum.

The philanthropic pages also show evidence that its diversity through minority-owned franchises and the company's contracts with minority groups continues to increase. The site also shows evidence that the company is being recognized, through awards, for its increased focus on diversity. For example, Advantica was ranked number 1 by Fortune magazine in its list of "America's 50 Best Companies for Minorities" for two consecutive years - 2000 and 2001. Interestingly, the site claims that the Anne Arundel Branch of the NAACP in Annapolis, Md., named Denny's Corporation of the Year in 1996. Annapolis is where Denny's class-action suit with the 6 Secret Service Agents originated. One of the company's best evidences that it has committed itself to the fair treatment of its customers is the 27-minute video that can be displayed on line or ordered for free from the company.

In a 1998 editorial in the Weekly Newspaper of the Food Service Industry (Adamson, 1998), new Advantica chief executive office James Damson outlined how a company could overhaul its culture. He states that there are 10 driving factors behind Denny's success: diversify your board of directors, be a zealot about diversity, make someone accountable, make sure everybody in the company owns diversity, and set clear policies and communicate them. He also said that a company must train its people, find out impediments to inclusion, monitor, measure and report, reward progress, and celebrate success.

Secondary Evidence. Although Denny's faced an explosive public relations crisis, it appears that its public relations team made all the right moves, as can be evidenced in numerous articles that appear in the mass media. A Fortune article (Faye, 1996) titled Denny's Changes its Spots, outlines the steps taken by Denny's to overcome its crisis. According to the article, Richardson moved quickly to resolve the law suits filed against the company. By 1995, Denny's paid $54 million to 295,000 aggrieved customers and their lawyers. As part of the settlement, Denny's promised to treat all customers equally in the future. The consent decree also mandated that Denny's publicize its nondiscriminatory policies and train employees in diversity issues. An independent civil rights monitor was appointed to supervise the restaurant chain for 7 years and to investigate further claims of discrimination.

A Restaurant's & Institutions article (Rousseau, 1997) focused on Denny's attention to diversity in its new television commercials which aired shortly after the crisis. The new campaign "rolled out a new $4 million-plus ad campaign targeted to African Americans" (Rousseau, 1997, p. 22). The campaign built on the theme "You work hard for your money." The message is "Welcome back to Denny's; we respect you, know that you have choices on how to spend your money, and want to be your top choice. The article also states that Denny's created a Spanish commercial targeting Hispanic Americans. In another Fortune article (Faircloth, 1998), the author asks "how did these racial sinners become role models for diversity? Hint: quickly, decisively, and sincerely." (p. 109.).

The article states that although Denny's overcame its negative image after the lawsuits, some question its motives. The article quotes Joseph Lowery, former head of the Southern Christian Leadership Conference, who stated that he compares the corporate initiative to a church offering. "Maybe you put your money in the plate because you're scared of going to hell; maybe you do it to support the good works of the church. Motivation is not important, what we want is results" (Faircloth, 1998, p. 109). Another Restaurants & Institutions article (Dailey, 1998) states that Denny's not only focused on putting a stop to discriminatory practices toward its customers, it also focused on making the restaurant chain one of the most diverse in the nation. The article states that in 1993, only one Denny's franchise belonged to a minority. By 1998, 35% of the franchised stores were minority owned.

The secondary evidence examined has some commonalities. By and large, the media reacted positively toward Denny's immediate actions to admit blame for the discriminatory acts. Also, the media reacted favorably toward the immediacy and urgency Denny's placed on the situation. Some hold Denny's up as the model for others to follow in similar circumstances.

Scholarly Journals. Chin et al. (1998) stated that Richardson's visibility during the crisis helped Denny's credibility with the media. Another credibility booster came when the company teamed with the NAACP to create real and sincere solutions to the crisis. One criticism made by the authors is that Denny's never mentioned the lawsuits in any of its commercials, which may have led to some confusion by customers. The article also states that Denny's overcame its crisis through other works such as making contributions to minority groups in the sum of $100,000. The company also pledged increased contracts with minority vendors.

Discussion. Denny's discriminatory practices by some employees were clearly wrong. However, company leaders and public relations practitioners should be commended for their actions following the 1993 crises. By accepting the blame immediately and working with the NAACP, the company employed forgiveness strategies to resolve the public relations crisis. According to Coomb's Crisis Type Matrix (1995) the type of crisis Denny's faced would be considered a transgression. A transgression is a crisis created by an internal component of an organization that was committed intentionally.

This was the case in Denny's situation. Although there was a set policy of non-discrimination, some members of the organization chose to ignore the rules. An acceptance of blame is evidenced by the company's willingness to settle the class action lawsuit and compensate the injured parties for a sum of $54 million. This is considered remediation. In several of its commercials and written advertisements, CEO Richardson directly apologized to Denny's customers for the discriminatory practices and pledged not to tolerate discrimination.

Furthermore, any employee engaging in discrimination would be fired if found to be practicing discrimination. This was considered repentance. Finally, the company moved to rectify any further problems with discrimination. In addition to working toward diversification in its contracting and franchising practices to include larger minority parties, the company worked diligently to train its employees to eliminate discrimination. This was the rectification phase.

DoD Joint Course in Communication, Class 02-C, Team 1