Entries

International Directory of Company Histories International Directory of Company Histories Further reading

NON JS

Shoney’s, Inc.

Shoneys, Inc.

1727 Elm Hill Pike
Nashville, Tennessee 37120
U.S.A.
(615) 391-5201
Fax: (615) 231-2621
Web site: http://shoneys.com

Public Company
Incorporated:
1968
Employees: 38,000
Sales: $1.2 billion (1997)
Stock Exchanges: New York
SICs: 5812 Eating Places; 6794 Patent Owners and Lessors

Headquartered in Nashville, Tennessee, Shoneys, Inc., is one of the restaurant industrys most respected companies. As of 1998 the restaurant chain operated or franchised over 1,300 restaurants in 34 states, including Shoneys, Captain Ds, and the Pargos and Fifth Quarter specialty restaurants. The company owned 893 restaurants and franchised 494 others.

Early Expansion

The company originated with a drive-in restaurant called Parkette in Charleston, West Virginia. Alex Shoenbaum opened the restaurant in 1947, then acquired a Big Boy franchise in 1951. Two years later, Shoenbaum renamed the Parkette Shoneys Big Boy. During this time, Ray Danner was building a restaurant business in central Tennessee and opened his first Big Boy franchise in 1959 in Madison, Tennessee. He incorporated his privately owned company in 1968 as Danner Foods, Inc. One year later Danner Foods became a publicly traded company.

During its affiliation with the Marriott Corporation, the parent company of Big Boy restaurants, Shoneys restaurants doubled in size every four years. Based on a chain of family-style coffee houses along the busy highways of the Southeast, Shoneys restaurants featured a friendly, uniformed waitstaff that served from a homestyle menu adapted to the region.

Danners Way Established

In 1972 the company dropped Big Boy Enterprises from its name, and Ray Danner assumed the role of chairperson and chief executive officer, while Alex Shoenbaum became a senior chairperson. Danner took an active role in Shoneys management, building the company on a foundation of hands-on, operations-oriented management. His unique style became part of the corporate culture, and his managers became Shoneyized or imbued with respect for efficiency and a sense of responsibility.

Danners Way, as it came to be known, promoted simplicity, customer satisfaction, constant striving for perfection, and management by example. His management team worked in shirtsleeves in order to be prepared to pitch in whenever and wherever necessary. Danner himself monitored everything from corporate staff practices to food service through the use of mystery shoppers dispatched periodically to each unit. He was also known to visit restaurants in person and to clean restrooms that did not meet his standards during his spot checks. His willingness to roll up his sleeves both proved his point and embarrassed the responsible individual, who cleaned alongside him.

Although employee standards at Shoneys were uncompromising, the rewards were enticing. The company instituted a program in which the best hourly workers could be awarded college scholarships that would help pave the road to middle and upper management positions within the company. In exchange, trainees would work nights and weekends and take college courses recommended by Shoneys. The company provided students with plenty of opportunities for advancement, maintaining five to seven manager positions for each restaurant, area manager positions for every three to four restaurants, and divisional director positions supervising ten to 20 restaurants. Furthermore, Shoneys recruited more than half of its managers internally. According to many observers, Danners management style was the basis of Shoneys strong profits and steady growth.

New Chains in the 1970s

Opportunities in the company were not limited to work in family-style restaurants. Danner had, in 1969, begun to market a new fast-food concept featuring batter-dipped fish and related food products for sale in a chain of Mr. Ds Seafood restaurants. By 1975, when the chains name was changed to Captain Ds, over 250 units were in operation. By 1980 there were more Captain Ds than Shoneys, and by 1985 the seafood chains sales constituted 30 percent of the companys total. Captain Ds has consistently outproduced its competitors, including its primary rival, Long John Silver.

After discovering that its family restaurants located near motels earned over 30 percent more than stand-alone shops, Shoneys established Shoneys Inns, a lodging division which it paired with specialty restaurants called Fifth Quarter Steak-houses. The two enterprises complemented each other, and were managed separately. Within ten years the chain of inns had grown to 21, but two nagging problems with the venture had developed. First, the hotels did not return the high, quick profits of the food service operations, and second, the vastly different management requirements clashed with Shoneys (and Danners) distinctive style. The chain was eventually sold to Gulf Coast Development, Inc. in 1991.

The Fifth Quarter concept has fared better as a growth vehicle for Shoneys. In a departure from the family concept, the dinner houses feature prime rib and alcoholic drinks on their menu. Despite its small size, providing less than four percent of company revenues, the Fifth Quarter chain has grown at a consistent 20 percent annually and is represented in five Southeast and Midwest states.

By the end of the 1970s Shoneys began to feel the constraints of a franchising agreement that limited its growth to an 11-state territory. In 1979 the company began to phase Big Boy marketing elements from its image. This was Shoneys first step toward severing its 25-year tie to Marriott Corporation. Shoneys forced the break when it built a restaurant in another Marriott franchisees territory. Although the new restaurant eliminated all vestiges of Big Boy from its signs and menus, the other franchisee sued, thereby starting the breakup process, which was accomplished in 1984.

Shoneys was able to capitalize on its increasingly identifiable name and shift its menu and image toward a healthier concept as a result of the breakup. Disenfranchisement has enabled the company to distance itself from the Big Boy characters physical image and remove the signature double-decker hamburger from its menu. Since the divorce, Shoneys has expanded its family restaurants territory to 29 states coast-to-coast.

Continued Expansion in the 1980s

In 1981 Danner stepped aside to make David K. Wachtel the chief executive officer of Shoneys, while he remained on the board of directors. Wachtel, a product of the Shoneys management training program, had started with the company at age 16 as a dishwasher in Nashville, Tennessee, and had moved steadily through the ranks of busboy and cook to become the manager of the first Captain Ds in 1969 at age 28. Wachtel immediately began to make changes in the Shoneys equation. He ended the companys 14-year franchise relationship with Heubleins Kentucky Fried Chicken for the same reason that Danner broke away from Marriott Big Boy: territorial limitations that set boundaries on growth.

Soon thereafter Wachtel bought Famous Recipe, a struggling Midwestern chicken chain. The Famous Recipe chain consisted of 225 stores founded by Lee Cummings, a nephew of Colonel Harland Sanders of Kentucky Fried Chicken fame. Shoneys worked to hone the Famous Recipe concept over the next few years by dropping unprofitable or mismanaged franchises, adopting a uniform farmhouse design, and diversifying the chains menu. Management also gave the chain a more personal image by adding Lees to the name and employing Cummings as concept spokesperson. By 1985 Lees Famous Recipe had been Shoneyized; its sales rose 103 percent, and the chain spanned 23 states.

During this time Wachtel also introduced a restaurant innovation that revitalized Shoneys morning sales reports. The all-you-can-eat breakfast bar, brought on in 1981, reversed a ten-year decline in morning sales. By the end of the decade the breakfast bar boosted morning sales at company-owned restaurants to 25 percent of total sales.

Despite accelerated morning sales and a $3.4 million net profit made in selling Heublein and acquiring Famous Recipe, Danner and other board members and managers felt that Wachtel was expanding the company too quickly, and he resigned the position of chief executive officer after occupying it for less than one year. Danner then resumed the position of chief executive officer and spent the next seven years struggling to find a successor who would carry on his management ideals.

In 1986 he made J. Mitchel Boyd, a longtime franchisee and an originator of Pargos specialty restaurants, chief executive officer and vice-chair. Boyd, his wife, Betty, and Gerry A. Brunetts had founded Pargos, a restaurant in Manasses, Virginia, that featured such light fare as appetizers, pasta, salads, and sandwiches, and was expanded to include nine restaurants in Tennessee and Virginia. This restaurant was made a part of Shoneys specialty group when Boyd assumed his role as vice-chair at Shoneys.

Company Perspectives:

Shoneys vision is to create exceptional customer price/ value through unique and competitive points of difference targeting outstanding food and hospitality in a clean, safe, fun and exciting atmosphere. Shoneys mission is to make every customer a regular guest.

In 1988 Danner engineered a $728 million recapitalization that paid shareholders a $16 per share cash dividend and paid Danner, who owned 19 percent of the stock at the time, $111 million in cash. The recapitalization was a clear sign that Danner was ready to hand Shoneys over to new management, and in 1989 he gave Boyd the chair.

It only took six months for Boyds emphases on marketing and experimentation with menus and overall company image to clash with Danners obsession with the day-to-day operations of the company. As with Wachtel, financial success did not earn Boyd any points. Leonard H. Roberts succeeded Boyd in December 1989 and has served as Shoneys chief executive officer and chairperson since that time. Roberts, known as something of a maverick in the restaurant industry, engineered Arbys Inc.s five-year turnaround in the 1980s. However, when his relationship with Arbys Victor Posner became strained over franchisee relations, Roberts accepted the chair at Shoneys. Roberts attempted to capitalize on Shoneys organizational and management strengths, while also developing its marketing and research and development.

Roberts faced a very different task at Shoneys than the Arbys situation had demanded: he was expected to continue the financial and organizational success for which the company was known before the recapitalization. Shoneys had never had an unprofitable quarter and had in the mid-1980s been named best managed restaurant company in the United States by the Wall Street Transcript. At the same time, Roberts hoped to continue the territorial expansion that Danner and others had begun after the 1984 break from Big Boy. From 1984 to 1989, Shoneys had moved into Ohio and Florida, then Kentucky, Indiana, Texas, New Mexico, Oklahoma, and Maryland/Washington D.C., but the 1989 recapitalization hindered Shoneys ability to invest in expansion from within.

The 1989 Racial Discrimination Suit

Roberts faced another challenge early in his career at Shoneys. In 1989 the Legal Defense and Education fund of the National Association for the Advancement of Colored People (NAACP) brought a discrimination suit against the company. The suit, which originated in Florida, charged that Shoneys systematically discriminated against African Americans by limiting employment opportunities and job selection, creating what it termed a hostile, racist work environment.

Shoneys signed an agreement with the Southern Christian Leadership Council (SCLC) in 1989 to invest over $90 million in minority business development, community service, and other socially responsible areas. The following year Shoneys launched an affirmative action strategy called Workforce 2000. The program mandates equitable representation of minorities and women in Shoneys ranks. The company is using some programs that were already in place, like the scholarship program, and has added recruitment programs at 48 historically black colleges and universities to enhance its affirmative action efforts.

Although the NAACP case was not settled until late 1992, and the charges of racism still haunted the companys image in the early 1990s, its efforts had met with some quantifiable success by that time: minorities represented 30 percent of Shoneys employees. Shoneys encouragement of entrepreneur-ship among minority businesspeople through its Minority Franchise Development Program had increased the number of minority franchisees from two to 11 and the number of units owned and operated by minority franchisees from two to 14. The companys Minority Purchasing Program uses minority suppliers for everything from childrens menus to food processing; from 1989 to 1992 annual purchasing from minority suppliers has increased from under $2 million to nearly $14 million.

Shoneys has also sought to polish its corporate image through philanthropic and community relations efforts. These include sponsorship of the Bootstrap Scholarship Awards, which honors Middle Tennessee high school seniors who have achieved academic success despite serious obstacles; support of the Southern Christian Leadership Conference; and support of the Tennessee Minority Purchasing Councils Business Opportunity Fair.

Roberts began to focus on franchising, a skill he honed while managing Arbys, and his primary goals are to add 500 franchises to Shoneys roster by the end of the 1990s and to dominate the family segment. The company added 48 franchisees in fiscal 1991, and would have to increase that per-year figure in order to reach its goal by the turn-of-the century. One franchising deal with Thompson Hospitality L.P., one of the largest minority-run food service operators in the country, has helped Shoneys further penetrate metropolitan Washington, D.C., and keep its agreement with the SCLC. Shoneys financed the $17 million deal to convert 31 former Marriott Big Boy restaurants into Shoneys by the mid-1990s.

To that end, Roberts tripled the size of the companys research and development staff and made that department part of marketing rather than operations. One of research and developments primary concerns was menu development, a high priority on Robertss list.

In the early 1990s the wisdom of the 1988 recapitalization became manifest. Shoneys stock nearly tripled from 1989 to 1991 and the companys value grew accordingly, from $273 million to $809 million. Additionally, the company made extraordinary progress on debt retirement, having exceeded its scheduled payments by $155 million and reduced the debts maturity by 3.5 years. Declining interest rates have not hurt the company, either; interest on debt dropped from a peak of 12.5 percent to nine percent.

A primary financial objective for the 1990s is a 20 percent annual increase in earnings, which will increase cash flow and enable Shoneys to retire more of its debt. As the debt is diminished, the company will free up more capital to invest in company stores, research and development, and expand its specialty chain. In order to achieve that goal, Shoneys instituted Project 80/85, a plan to increase customer satisfaction by setting goals of 80 percent customer satisfaction in 1992 and 85 percent in 1993.

In early November 1992, Shoneys, Inc. received provisional approval of a settlement in the discrimination lawsuit filed by the NAACP in 1989. The settlement addressed possible monetary damages for applicants and employees of the company restaurant entities and corporate office between February of 1985 and November 3, 1992. It was estimated that between 20,000 and 40,000 current employees, former workers, and applicants would share in the settlement. Under the settlement, Shoneys made $105 million available to pay potential claims. The company also agreed to pay $26 million of plaintiff legal expenses and $4 million in various related costs. The settlement resulted in a special charge of $77.2 million against earnings for the fourth quarter and fiscal year of 1992. The company expected that substantially all of the funds would be paid over a five-year period. The lawsuit appeared to have little impact on Shoneys stock. In fact, the companys stock price rose in the days following the announcement of the settlement.

Danner s reputation suffered in the wake of the settlement, however. A defendant in the suit, Danner was accused of encouraging racial bias at Shoneys. The companys burden in the settlement was eased when Danner contributed 83 percent of the settlement by putting up some of his Shoneys stock. In March 1993 the company paid $110 for the remainder of Danners stock. At the same time Shoneys announced that Danner would not stand for reelection to the companys board. Other than the legacy of his substantial contributions to the companys growth, Danners connection to the company was ended.

Continued Management Turmoil in the 1990s

In December of 1992 Len Roberts resigned as chief executive officer and chairman of Shoneys, Inc. Taylor Henry, Jr., an 18-year Shoneys veteran who played a significant role in 1988s recapitalization plan, succeeded Roberts in both positions.

Shoneys moved towards decentralization of its franchising efforts, including Project 500, leaving franchising to the individual restaurant chains. A strong cash flow helped ease the companys debt burden in 1993. By May, Shoneys total debt had been decreased by $250 million, to $518 million. The company also directed some of its cash to its remodeling budget. Set at $6.6 million in 1992, Shoneys remodeling budget was more than doubled to $15 million for both 1993 and 1994. The company hoped the investment would pay off: in the past, same-store sales grew more quickly for its remodeled restaurants.

Sales fell in the mid-1990s, and the company responded with yet another change in management in early 1995. President and CEO Henry resigned, to be replaced with turnaround specialist Stephen Lynn. Several other top managers also left at that time. The company also sold its private label food division, Mike Rose Foods, and Lees Famous Recipe Chicken.

Some of the funds for that sale went toward purchasing Shoneys largest franchisee, TPI Restaurants, in 1996. The acquisition brought an additional 176 Shoneys Restaurants and 67 Captain Ds into the company fold. The same year, Shoneys signed Andy Griffith as a spokesperson for the company.

The acquisition of TPI restaurants boosted fiscal 1997 revenues to $1.2 billion, up 12 percent from 1996. However, several factors led to a net loss for the year of $35.7 million. Shoneys closed 75 underperforming units in 1997 and took an asset impairment charge of $54 million because of underperforming restaurant properties. In addition, expenses from a proxy contest came to $5.3 million.

The proxy battle was initiated in 1997 by shareholders disappointed with the companys financial performance. To help resolve the fight, Shoneys added three new directors to the board in August. One of these, J. Michael Bodnar, replaced Lynn as CEO in November 1997. The management shakeup included W. Craig Barber, who resigned as senior executive vice-president and chief financial officer. As the companys sixth CEO in a little over 10 years, Bodnar faced the daunting task of providing Shoneys with the leadership it wanted and clearly needed.

Principal Divisions

Shoneys Restaurants; Captain Ds; Casual Dining group.

Further Reading

Chaudhry, Rajan, Shoneys Mulls Life after Debt, Restaurants & Institutions, May 20, 1992.

Cheney, Karen, Cater to Kids, Please Parents, Restaurants & Institutions, July 8, 1992.

, Food Bars, Light Items Wake Up Breakfast Patrons, Restaurants & Institutions, June 24, 1992.

Engardio, Pete, Shoney: Bursting Out of Its Dixie Boundaries, Business Week, April 15, 1985.

Feldman, Rona, Market Segment Report: Family, Restaurant Business, August 10, 1992.

Gindin, Rona, Shoneys Shows Whos Boss, Restaurant Business, October 10, 1985.

Insights: Shoneys Expands A.M. Bar, Forecasts Unit Growth, Restaurant Business, January 1, 1988.

Kochilas, Diane, Leonard Roberts, Restaurant Business, May 20, 1991.

Konrad, Walecia, Shoneys Needs a Recipe for Succession, Business Week, December 25, 1989.

Leonard Roberts: Can He Put More Meat on Shoneys? Business Week, October 8, 1990.

Raffio, Ralph, Market Segment Report: Family, Restaurant Business, October 10, 1991.

Rudolph, Barbara, Something Has to Be Wrong, Forbes, July 19, 1982.

Shoneys Founder Divests His Stake, Business Week, March 22, 1993, p. 42.

Shoneys Inc. Reports 1997 Results, PR Newswire, December 22, 1997.

Shoneys Shines, Forbes, August 2, 1993, p. 152.

Shoneys Taps Bodnar, a Dissident Director, to Be President, Chief, Wall Street Journal, November 13, 1997, p. B15.

April Dougal
updated by Susan Windisch Brown

Cite this article
Pick a style below, and copy the text for your bibliography.

  • MLA
  • Chicago
  • APA

"Shoney’s, Inc." International Directory of Company Histories. 1998. Encyclopedia.com. 29 Aug. 2016 <http://www.encyclopedia.com>.

"Shoney’s, Inc." International Directory of Company Histories. 1998. Encyclopedia.com. (August 29, 2016). http://www.encyclopedia.com/doc/1G2-2842700134.html

"Shoney’s, Inc." International Directory of Company Histories. 1998. Retrieved August 29, 2016 from Encyclopedia.com: http://www.encyclopedia.com/doc/1G2-2842700134.html

Shoney’s, Inc.

Shoneys, Inc.

1727 Elm Hill Pike
Nashville, Tennessee 37120
U.S.A.
(615) 391-5201
Fax: (615) 231-2621

Public Company
Incorporated: 1968
Employees: 34,600
Sales: $2 billion
Stock Exchanges: New York
SICs: 5812 Eating Places; 6794 Patent Owners & Lessors

Headquartered in Nashville, Tennessee, Shoneys, Inc. is one of the restaurant industrys most respected companies. The United States tenth largest restaurant chain operates or franchises over 1,800 restaurants in 36 states and Canada, including Shoneys, Captain Ds, Lees Famous Recipe Chicken, and the Pargos and Fifth Quarter specialty restaurants.

The company originated with a drive-in restaurant called Parkette in Charleston, West Virginia. Alex Shoenbaum opened the restaurant in 1947, then acquired a Big Boy franchise in 1951. Two years later, Shoenbaum renamed the Parkette Shoneys Big Boy. During this time, Ray Danner was building a restaurant business in central Tennessee and opened his first Big Boy franchise in 1959 in Madison, Tennessee. He incorporated his privately owned company in 1968 as Danner Foods, Inc. One year later Danner Foods became a publicly traded company.

During its affiliation with the Marriott Corporation, the parent company of Big Boy restaurants, Shoneys restaurants doubled in size every four years. Based on a chain of family-style coffee houses along the busy highways of the Southeast, Shoneys restaurants featured a friendly, uniformed waitstaff that served from a homestyle menu adapted to the region.

In 1972 the company dropped Big Boy Enterprises from its name, and Ray Danner assumed the role of chairperson and chief executive officer, while Alex Shoenbaum became a senior chairperson. Danner took an active role in Shoneys management, building the company on a foundation of hands-on, operations-oriented management. His unique style became part of the corporate culture, and his managers become Shoneyized or imbued with respect for efficiency and a sense of responsibility. Danners Way, as it came to be known, promoted simplicity, customer satisfaction, constant striving for perfection, and management by example. His management team worked in shirtsleeves in order to be prepared to pitch in whenever and wherever necessary. Danner himself monitored everything from corporate staff practices to food service through the use of mystery shoppers dispatched periodically to each unit. He was also known to visit restaurants in person, and to clean restrooms that didnt meet his standards during his spot checks. His willingness to roll up his sleeves both proved his point and embarrassed the responsible individual, who cleaned alongside him.

Although employee standards at Shoneys were uncompromising, the rewards were enticing. The company instituted a program in which the best hourly workers could be awarded college scholarships that would help pave the road to middle and upper management positions within the company. In exchange, trainees would work nights and weekends and take college courses recommended by Shoneys. The company provided students with plenty of opportunities for advancement, maintaining five to seven manager positions for each restaurant, area manager positions for every three to four restaurants, and divisional director positions supervising ten to twenty restaurants. Furthermore, Shoneys recruited more than half of its managers internally.

According to many observers, Danners management style was the basis of Shoneys strong profits and steady growth.

Opportunities in the company were not limited to work in family-style restaurants. Danner had, in 1969, begun to market a new fast-food concept featuring batter dipped fish and related food products for sale in a chain of Mr. Ds Seafood restaurants. By 1975, when the chains name was changed to Captain Ds, over 250 units were in operation. By 1980 there were more Captain Ds than Shoneys, and by 1985 the seafood chains sales constituted 30 percent of the companys total. Captain Ds has consistently outproduced its competitors, including its primary rival, Long John Silver.

After discovering that its family restaurants located near motels earned over 30 percent more than stand-alone shops, Shoneys established Shoneys Inns, a lodging division which it paired with specialty restaurants called Fifth Quarter Steakhouses. The two enterprises complemented each other, and were managed separately. Within ten years the chain of inns had grown to 21, but two nagging problems with the venture had developed. First, the hotels did not return the high, quick profits of the food service operations, and second, the vastly different management requirements clashed with Shoneys (and Danners) distinctive style. The chain was eventually sold to Gulf Coast Development, Inc. in 1991.

The Fifth Quarter concept has fared better as a growth vehicle for Shoneys. In a departure from the family concept, the dinner houses feature prime rib and alcoholic drinks on their menu. Despite its small size, providing less than four percent of company revenues, the Fifth Quarter chain has grown at a consistent 20 percent annually, and is represented in five Southeast and Midwest states.

By the end of the 1970s Shoneys began to feel the constraints of a franchising agreement that limited its growth to an 11-state territory. In 1979 the company began to phase Big Boy marketing elements from its image. This was Shoneys first step toward severing its 25-year tie to Marriott Corporation. Shoneys forced the break when it built a restaurant in another Marriott franchisees territory. Although the new restaurant eliminated all vestiges of Big Boy from its signs and menus, the other franchisee sued, thereby starting the breakup process, which was accomplished in 1984.

Shoneys was able to capitalize on its increasingly identifiable name and shift its menu and image toward a healthier concept as a result of the breakup. Disenfranchisement has enabled the company to distance itself from the Big Boy characters physical image and remove the signature double-decker hamburger from its menu. Since the divorce, Shoneys has expanded its family restaurants territory to 29 states coast-to-coast.

In 1981 Danner stepped aside to make David K. Wachtel the chief executive officer of Shoneys, while he remained on the board of directors. Wachtel, a product of Shoneys management training program, had started with the company at age 16 as a dishwasher in Nashville, Tennessee, and had moved steadily through the ranks of busboy and cook, to become the manager of the first Captain Ds in 1969 at age 28. Wachtel immediately began to make changes in the Shoneys equation. He ended the companys 14-year franchise relationship with Heubleins Kentucky Fried Chicken for the same reason that Danner broke away from Marriott Big Boy: territorial limitations that set boundaries on growth.

Soon thereafter Wachtel bought Famous Recipe, a struggling Midwestern chicken chain. The Famous Recipe chain consisted of 225 stores founded by Lee Cummings, a nephew of colonel Harland Sanders of Kentucky Fried Chicken fame. Shoneys worked to hone the Famous Recipe concept over the next few years by dropping unprofitable or mismanaged franchises, adopting a uniform farmhouse design, and diversifying the chains menu. Management also gave the chain a more personal image by adding Lees to the name and employing Cummings as concept spokesperson. By 1985 Lees Famous Recipe had been Shoneyized; its sales rose 103 percent and the chain spanned 23 states.

During this time, Wachtel also introduced a restaurant innovation that revitalized Shoneys morning sales reports. The all-you-can-eat breakfast bar, brought on in 1981, reversed a ten-year decline in morning sales. By the end of the decade, the breakfast bar boosted morning sales at company owned restaurants to 25 percent of total sales.

Despite accelerated morning sales and a $3.4 million net profit made in selling Heublein and acquiring Famous Recipe, Danner and other board members and managers felt that Wachtel was expanding the company too quickly, and he resigned the position of chief executive officer after occupying it for less than one year. Danner then resumed the position of chief executive officer and spent the next seven years struggling to find a successor who would carry on his management ideals.

In 1986 he made J. Mitchel Boyd, a longtime franchisee and an originator of Pargos specialty restaurant, chief executive officer and vice-chair. Boyd, his wife Betty, and Gerry A. Brunetts had founded Pargos, a restaurant in Manasses, Virginia, that featured such light fare as appetizers, pasta, salads, and sandwiches, and was expanded to include nine restaurants in Tennessee and Virginia. This restaurant was made a part of Shoneys specialty group when Boyd assumed his role as vice-chair at Shoneys.

In 1988 Danner engineered a $728 million recapitalization that paid shareholders a $16 per share cash dividend and paid Danner, who owned 19 percent of the stock at the time, $111 million in cash. The recapitalization was a clear sign that Danner was ready to hand Shoneys over to new management, and in 1989 he gave Boyd the chair.

It only took six months for Boyds emphases on marketing and experimentation with menus and overall company image to clash with Danners obsession with the day-do-day operations of the company. As with Wachtel, financial success didnt earn Boyd any points. Leonard H. Roberts succeeded Boyd in December 1989 and has served as Shoneys chief executive officer and chairperson since that time. Roberts, known as something of a maverick in the restaurant industry, engineered Arbys Inc.s five-year turnaround in the 1980s. But when his relationship with Arbys Victor Posner became strained over franchisee relations, Roberts accepted the chair at Shoneys. Roberts attempted to capitalize on Shoneys organizational and management strengths, while also developing its marketing and research and development.

Roberts faced a very different task at Shoneys than the Arbys situation had demanded: he was expected to continue the financial and organizational success that the company was long known for before the recapitalization. Shoneys had never had an unprofitable quarter and had in the mid-1980s been named best managed restaurant company in the United States by the Wall Street Transcript. At the same time, Roberts hoped to continue the territorial expansion that Danner and others had begun after the 1984 break from Big Boy. From 1984 to 1989, Shoneys had moved into Ohio and Florida, then Kentucky, Indiana, Texas, New Mexico, Oklahoma, and Maryland/Washington D.C. But the 1989 recapitalization hindered Shoneys ability to invest in expansion from within.

Roberts faced another challenge early in his career at Shoneys. In 1989 the Legal Defense and Education fund of the National Association for the Advancement of Colored People (NAACP) brought a discrimination suit against the company. The suit, which originated in Florida, charged that Shoneys systematically discriminated against African Americans by limiting employment opportunities and job selection, creating what it termed a hostile, racist work environment.

Shoneys signed an agreement with the Southern Christian Leadership Council (SCLC) in 1989 to invest over $90 million in minority business development, community service, and other socially-responsible areas. The following year Shoneys launched an affirmative action strategy called Workforce 2000. The program mandates equitable representation of minorities and women in Shoneys ranks. The company is using some programs that were already in place, like the scholarship program, and has added recruitment programs at 48 historically black colleges and universities to enhance its affirmative action efforts. Shoneys has also encouraged entrepreneurship among minority businessmen through its Minority Franchise Development Program; since 1989, the company has increased the number of minority franchisees from two to eleven. The companys Minority Purchasing Program uses minority suppliers for everything from childrens menus to food processing; from 1989 to 1992 annual purchasing from minority suppliers has increased from under $2 million to nearly $14 million.

Although the NAACP case had not been settled in 1992, and the charges of racism still haunt the companys image, its efforts have met with some quantifiable success: minorities represent 30 percent of Shoneys employees. Moreover, the number of minority franchisees has increased since 1989 from two to 11. At the same time, the number of units owned and operated by minority franchisees has climbed from two to 14. Annual purchasing from minority business suppliers also increased from less than $2 million in 1989 to nearly $14 million in 1992.

Shoneys has also sought to polish its corporate image through philanthropic and community relations efforts. These include sponsorship of the Bootstrap Scholarship Awards, which honors Middle Tennessee high school seniors who have achieved despite serious obstacles; support of the Southern Christian Leadership Conference; and support of the Tennessee Minority Purchasing Councils Business Opportunity Fair.

Roberts began to focus on franchising, a skill he honed while managing Arbys, and his primary goals are to add 500 franchises to Shoneys roster and, by the end of the 1990s, to dominate the family segment. The company added 48 franchisees in fiscal 1991, and will have to increase that per-year figure in order to reach its goal by the turn-of-the century. One franchising deal with Thompson Hospitality L.P., one of the largest minority-run food service operators in the country, has helped Shoneys further penetrate the Washington, D.C., area and keep its agreement with the SCLC. Shoneys financed the $17 million deal to convert 31 former Marriott Big Boy restaurants into Shoneys by the mid-1990s.

To that end, Roberts tripled the size of the companys research and development staff and made that department part of marketing rather than operations. One of research and developments primary concerns was menu development, a high priority on Robertss list.

In the early 1990s the wisdom of the 1988 recapitalization became manifest. Shoneys stock nearly tripled from 1989 to 1991 and the companys value grew accordingly, from $273 million to $809 million. Additionally, the company made extraordinary progress on debt retirement, having exceeded its scheduled payments by $155 million and reduced the debts maturity by 3.5 years. Declining interest rates havent hurt the company, either; interest on debt dropped from a peak of 12.5 percent to 9 percent.

A primary financial objective for the 1990s is a 20 percent annual increase in earnings, which will increase cash flow and enable Shoneys to retire more of its debt. As the debt is diminished, the company will free up more capital to invest in company stores, research and development, and expand its specialty chain. In order to achieve that goal, Shoneys instituted Project 80/85, a plan to increase customer satisfaction by setting goals of 80 percent customer satisfaction in 1992 and 85 percent in 1993.

In early November 1992, Shoneys, Inc. received provisional approval of a settlement in the discrimination lawsuit filed by the NAACP in 1989. The settlement addressed possible monetary damages for applicants and employees of the company restaurant entities and corporate office between February of 1985 and November 3, 1992. It was estimated that between 20,000 and 40,000 current employees, former workers, and applicants would share in the settlement. Under the settlement, Shoneys made $105 million available to pay potential claims. The settlement resulted in a special charge of $77.2 million against earnings for the fourth quarter and fiscal year of 1992. The company states that it expects that substantially all of the funds will be paid over a five-year period. The lawsuit appeared to have little impact on Shoneys stock. In fact, the companys stock price rose in the days following the announcement of the settlement.

In December of 1992 Len Roberts resigned as chief executive officer and chairman of Shoneys, Inc. to pursue other interests. Taylor Henry, Jr., an 18-year Shoneys veteran who played a significant role in 1988s recapitalization plan, succeeded Roberts in both positions.

Although competition within the family dining segment is fierce, Shoneys continued in the 1990s to capitalize on diversification, service, new marketing strategies, and menu development. Shoneys moved towards decentralization of its franchising efforts, including Project 500, leaving franchising to the individual restaurant chains.

Principal Subsidiaries

Shoneys Restaurants; Captain Ds; Lees Famous Recipe; Mike Rose Foods; Pargos; Fifth Quarter Steakhouses.

Further Reading

Engardio, Pete, Shoney: Bursting Out of Its Dixie Boundaries, Business Week, April 15, 1985; Chaudhry, Rajan, Shoneys Mulls Life After Debt, Restaurants & Institutions, May 20, 1992; Cheney, Karen, Cater to Kids, Please Parents, Restaurants & Institutions, July 8, 1992; Cheney, Karen, Food Bars, Light Items Wake Up Breakfast Patrons, Restaurants & Institutions, June 24, 1992; Feldman, Rona, Market Segment Report: Family, Restaurant Business, August 10, 1992; Gindin, Rona, Shoneys Shows Whos Boss, Restaurant Business, October 10, 1985; Insights: Shoneys Expands A.M. Bar, Forecasts Unit Growth, Restaurant Business, January 1, 1988; Kochilas, Diane, Leonard Roberts, Restaurant Business, May 20, 1991; Konrad, Walecia, Shoneys Needs a Recipe for Succession, Business Week, December 25, 1989; Leonard Roberts: Can He Put More Meat on Shoneys? Business Week, October 8, 1990; Raffio, Ralph, Market Segment Report: Family, Restaurant Business, October 10, 1991; Rudolph, Barbara, Something Has to be Wrong, Forbes, July 19, 1982.

April Dougal

Cite this article
Pick a style below, and copy the text for your bibliography.

  • MLA
  • Chicago
  • APA

"Shoney’s, Inc." International Directory of Company Histories. 1993. Encyclopedia.com. 29 Aug. 2016 <http://www.encyclopedia.com>.

"Shoney’s, Inc." International Directory of Company Histories. 1993. Encyclopedia.com. (August 29, 2016). http://www.encyclopedia.com/doc/1G2-2841100151.html

"Shoney’s, Inc." International Directory of Company Histories. 1993. Retrieved August 29, 2016 from Encyclopedia.com: http://www.encyclopedia.com/doc/1G2-2841100151.html

Facts and information from other sites