itterTaste JOHN DORSCHNER

S01ne of the country's brightest blach business people thought

Burger King was their ticket to the fi(ood life. They soondiscovered that you can~t always have it your way.

wanted to be an entrepreneur, to live the American dream,"Thad Deas mumbled. He was" dri\ iog around Allama. showing .1 jour­nalisl 'iitc~ where 3lllbitiou~ Afrk-anAlllcn('.m:. like him...elf had tried 10 find"ucces\ owning Burger KlIlg rcs[,tUrants- and failed ... [ thought I had done allthe right things 3" ;.Ill American - not as;1 h/acJ.. American. but a:-. an ,,"'mcric3n.'·He pulled out a handkerchief and dabbedat his eyes, cmbarnbsed by hls teaTs."The biggest hUrl in my life was lo\ingthat store."

He was raised on the lough streel.S ofOvertown. a Vietnam vel. not the kind of

guy given 10 crying. We stopped at a traffic light In

fronl of a [amler Burger King. where several blackfranchisees had gone broke. A couple of blocks awaywas a grim housing project. Nearby was a huge pawnshop. Across the street wa.<, a dOC101 advenising treat­ment for dnJg addicls. Not the son of place you'dexpect peoplc to StOp to eat.

"Deslined to faiL" Deas mumbled. "No one couldmake:l success here." For most of his life. Deasknew all about success. He had made it out ofMiami·... grim inner city through unrelcllIing detcnni­nation. He had stant.'d as a S90-a-weck mail clerk inBurger King.\. Mi3mi headquancn. and worked hisway up to a $60.000-:1-year joll as comtruction super­visor for new Burger Kings in the Southc:lst. In 1986.at age 40. seeing few blacks above him in the BurgerKing. hiemrchy. wallling to take :Hlother .. tep up. heresigned and bought hi~ own re~t:lLJranL

The resuhing disaster, he said, hun not only him.but all his relatives in Miami and Atlanta who lookedup to him as an example of how hard wor\... could pulla black man out of poveny. "I'm it." he said, "I'mIhe example for my nieces and nephews :lnd !>ons anddaughtcr.j:. "

Only 3fter it was over did Deas become convincedthat some Burger King officials had lIltcntiomllly puthim in a restaurant where he was bound to fail - andIhen helped ensure his failure by secretly removingnew equipment jusl before he look over. replacing itwilh old equipment that was bound to break downand COSI huge amounts in repairs.

This suspicion may sound bizarre, but Ihree for·mer Burger King district managers in Atlanta havesaid under oath that switching good equipment forrundown machines was common in the 19&Os. "Weswapped OUt broilers." says Greg Butler. a black for­mer manager. "We swapped out microwave ovens.On occasion, we could have swapped out fryers, We

"warped our lOa"tcr!>. We swapped out CRTs." meaningcomputtrJl.l."d cil~h regi!>ters. "There is no way that thefranchi ..ee can find out." He savs the victims werealway~ black. None of the three ex-district managerscould recall this cver happening. 10 a white.

The ~wapping of equipment may be an extremeexample. but many fonner black franchi"ees in severalcitie~ say that Burger King put them in situations ­u\ually bad inner,cll) location~ - in which they werede<>tined to fail. '"The new dbcnmination i" rather sub­tle in some ways," <':lYs Carole Hall. a fonner owncr ofBurger King<, in DClroil. '"but it's cenainly powerful."

Burger King executives say the company has donenothing wrong. The~ ...ay they have no \...nowledgc ofequipment being switched and say the corporationwouldn'l condone lhe practice under any circumstances.They say Burger 'King has a long record of helpingminoritie!>. Just last year. the predominantly blackMiami-Dade Chamber of Commerce selected BurgerKing Corp. as il~ Business of the Year.

Marl.. A. Giresi. senior vice president and corporatecounsel of the Miami-based company. says that BurgerKmg ha" ~pcnt millions trying to prop up struggling

Howard Walsh in front

of the burned out hulk

of what was once his

Burger King restaurant.

"Not knowing much about

th business, I was naive.I trusted Burg r King."

black rcstaurant owners. He says black franchisees werenever limited to black areas. He says that Deas andother blacks voluntarily signed contracts agreeing to thdeals they negotiated. "It·s not a risk-free business." hesays. "You risk your money. You risk your time."

Giresi says he knows nothing about the spccifics ofwhat happened in Atlanta and suggests Tropic callRobert Gumm, who used to be BKC\ regional vicepresident there. Gumm. now a Wendy's executive.refused to comment.

Ray Hood-Phillip. a black woman who is a BKCconsultant on minority issues, says the situation hasimproved markedly since Grand Metropolitan, a Britishconglomerate. took over Burger King in 1989. BothHood-Phillips and Gir si point proudly to an opinionthat U.S. District Judge James Kehoe issued in a case inwhich he stated that BKC's "policy was one of commit­ment to minority development."

In fact. though Burger King has regularly receivedpositive publicity for its plans to increase minority fran­chises, it has never come close to fulfilling them. In1983, it signed an agreement with Jesse Jackson andOperation PUSH, promising that by 1987,15 percent ofits franchised restaurants would be run by blacks.Today, seven years after the original target date. a mere3.5 percent are black owned.

When Jesse Jackson was asked how well BurgerKing had corne through on its promises, he responded:"Well, let's just say it was not a Whopper."

Unequal Opportunity

Accusations of unfair treatment for black entrepre­neurs are not unique to the fast-food giant. Similar com­plaints have emerged against Ford and other big compa­nies. Four decades after fighting for the right to sitwhere they wanted on Montgomery buses. blacks feelthey are being subtly denied an equal chance to climbthe corporate ladder or own their own businesses. Arecent University of Chicago survey of 1,200 AfricanAmericans found a profound pessimism: 70 percent feltthat the American legal and economic system is funda­mentally unfair to them and will not improve in theirlifetimes.

In a recent book, The Rage ofa Privileged Class,Ellis Case begins with this bald pronouncement:

"Despite its very evident prosperity, muchof America's black middle class is inexcruciating pain." The reason is the fail­ure of society to live up to the promisethat "if you work hard, get a good educa­tion and play by the rules, you will beallowed to advance and achieve to thelimits of your ability."

Carole Hall, a Harvard graduate wholed a class-action lawsuit by minorityfranchisees against BKC, says she andmost of her co-plaintiffs had "multiplecollege degrees. They all had been verysuccessful in other ventures before. Theywere high achievers, used to long hourswith no complaints. They didn't ask forhandouts. We felt that if vou worked hard,and you were fair. and you paid bills ontime, you'd be successful. ... It took along time to see you were duped."

Is duped too strong a word? BurgerKing executives think so. Hood-Phillipssays one huge problem had nothing to dowith the corporation: Many blacks cameinto the system undercapitalized, some­times with lOO percent financing, andwhen there was "a hiccup in the econo­my," many hadn't put away enoughmoney to make their debt payments.

If that's true, Carole Hall says, thenBurger King was guilty of rushing blacksinto the ystem to fulfLIl PUSH quotas ­heedless of the painful disasters that mightlie ahead. "They set us up to fail," shesays. "That's all there was to it."

The Sound of Silence

In Dade County, three of the 17 BurgerKing franchisees are African Americans.They own six stores - all in predomi­nantly black areas of Northwest Dade.Wilma Williams, who owns a BurgerKing in Carol City, says, "I have no prob­lems with them." He won't say anythingmore. Willie Taylor, who owns four of the

six, didn't return Tropic's repeated phonecalls, One of his sites is at Northwest 54thStreet and Seventh Avenue, an intersec­Ilon that a Herald article described lastOctober as "a shooting gallery:'

The third black franchisee here ISKelly Jacobs, a Harvard grad who has hada long history With Burger King. About 20years ago, the company sold him a restau­rant in the Bronx. Uon Tucker. a blackfonner BKC manager who knew Jacobs inthe Bronx. remembered hun as a decentyoung man in an awful area. "There weredrug addicts and methadone clinics allaround him. He had a shotgun and a base-­ball bat behind the counter:' BelfordHarty. a longtime franchisee in Harlem.says Jacobs didn't ha\'e enough protec­tion: "\\'hat KeUy needed was tltrtt goril­las with guns to stand there and shool pe0­ple day and night.··

When Jacobs' reslaurant failed. BurgerKing gave him another chance. allowinghim to buy his current location. It's onNonhwesl 27th Avenue m Opa-Iocka - ahigh-<rime area.

Jacobs. 100. did nOI want 10 be inter­viewed for this story.

In fact, many black franchisees areht>sitant 10 talk. Burger King is a corporatemonolith - the Avis to McDonald'sHertz - and With $6.7 billion a year insales. il commands conSiderable clout.Eighty-seven percent of its 6, I00 restau­rants are run by franchisees, and they aretied to corporate ht:adquaners by a com­plex contractual umbilical cord that mightmakt: many hesitant to speak out.

However. hccaust: of a lawsuit nowworking through the courts, a window hasbeen opened into how Burger King hasdone business in Atlanta. In sworn state­ments, fonner middle-level Burger Kingmanagers have lent credence to the corn­plamts by minority franchisees. painting apomait of a system that - intentionallyor nOI - was Slacked against black busi­nessmen.

Black Tax

Afler 16 years with Burger Kmg:. ThadDeas figured he'd risen as far as a blackmanager was likely to rise, but he was notlhe type to be overwhelmed by bitterness:"My thinking was face it and move on."

Like many Burger King managers. hesaw buying his own restaurant as 3 logicalnext step up. He was offered a restaurantin an impoverished black area in westernAtlanta. The restaurant was squeezed intolhe middle of the block. Fast-food placesdo best on comers, where ttlty're easier 10

sec and easier to get to.As a veteran Burger King manager,

Deas knew that not all restaurants thatBKC offered were good ones. and heapproached it carefully. He didn't like (he

location. "Notlhat I'm against the innercity." he explained. "But I knew the hard­ships that an inner-<ity store brings, evento a knowledgeable franchisee, and I hadnever run a Burger King before."

Due to the legacy of racism in Ameri­ca. black areas tend 10 be poor areas, andpoor areas tend to be high-crirne areas.This means that businesses in poor blackareas have additional e:lpenses. "It'scalled the 'black tax.: .. says Carole Hall.the Harvard MBA. That mcludes moremoney for security, higher insurance Tates.more employee theft. less efficientemployees. What's more, inner city gener­ally means older restaurants that needmore mamtenance. The contracts WithBKC require O1.l.'Oers to periodicallyremodel the store. to bnng it up 10 "cur­rent image:' which oflen is an expensiveburden on inner-<ity stores that newersuburban stores don't have.

Not only were expenses high. but salestended 10 be low. 10e big profit items infast food are soft drinks and fries: themeal sandwiches make much less. In poorneighborhoods. customers tend to buy theburgers and nothing else. Carl Fullard,struggling 10 SlaY alive wilh one inner-<itystore in Philadelphia, says he ollce calcu­lated that ifhis black customer spent thesame amount on trimmings that the typi­cal suburban customer did in the Philadel,phia marker. he would be earning an addi­tional $450,000 a year.

Trust Me

Deas turned down the restaurant. DKCsold it to another African American. whokept it for a couple of years before sellingil back to the company at a loss. Eventual­ly, the restaurant ....-as closed down.

Meanwhile, Deas was offered anotherrestaurant - No. 899, at Jonesboro Roadand 1-285 in southeastern Atlanta. Again.he didn'tlike what he saw. There weresome rundown apartment houses nearby,and some public housing. Behind No. 899was 3 large discount store. Richway. Deaswcnt inside it. He didn't see a 101 of eus­tomeNi.

While Dcas considered No. 899. nKCfinancial specialisl Janel Wilkowski hadwrilten a confidential corporale melllorecommending il be sold a" p:lrt of:1IIoverall policy of building new company·o~rated slore." in Atlanla's nOl1hCI1l $ub­orbs while selling off 10w'rlCrfolluingrestaurants in southern Allanta. ThoughWitkowski didn't mention race. the north­ern area was arnuenl and overwhelminglywhite; ltlt southern areas included poorblack neighborhoods, such as the areaaround 899. In particular. Witkowski saidthat 899 should be sold 10 Deas because of"its poor local ion . _ . in an economicallydepressed area of the city."

Though Deas had no way of knowingabout the memo, he was bothered by thearea and by the restaurant itself. It was oldand rundown, and BKC wanted it broughtup to "CUITent image." That meant5200,000 in renovations in addition to thepurchase price.

BKC was asking aboul $350,000 forNo. 899. This was a standard agreement$40,000 of this was a nonrefundable fran·ehise fee. BKC would continue 10 own Iheland and lhe building. Deas was basicallybuying the equipment. He would beresponsible for maintaining the property11lf: deal was for 20 years. If BKCthought he was a good operator. he couldrenew for another 20 years.

Being a good operator meant keepingup with his payments: Of eaC'h dollar acustomer spends in his restaurant, a fran­chisee must pay BKC 3.5 percent for roy­alties and another 4 per~nl for ad\'enis­ing. Usually, another 8.5 pt"rcent goes forrenl. For Deas, BKC offered to reduce hisrent, but on the understanding he wouldspend the leflover money on remodeling

"1 rode and rode around. and I tried 10make a positive out of it:' he says. "IfDurger King says that's where you shouldgo. that's where you should go:' OKCwas pressuring him to :Kcepl the place.and making him feci guilty that he hadalready rejected one sile. There weresome arnuent, white suburbs nearby. butthey were on the other side of 1-285. Deaskepi a.~king himself, "Will whites comeacross the expressway for service?" liedecided the answer was 110. Despile theinlense pressure, Ocas tumed down No.899.

BKC next offered No. 899 to HowardWalsh, a fornler Coca-Cola executive. I\tthe time. 1987. Walsh was desperate tofind a restaurant. He already had oneBurger King, and it was not providing himwith the cash now he needed to makepayments on his start-up loan.

Until Burger King. Walsh had grownaccuslomed to trusting corporate America.Wilh a master's in induslrial technology.he had soared through several major busi·nesses. At General Eleelric, he superviseda group of 50 employees. By the mid­19805, he was making $55.000 a year as aCoca-Cola executive. and his wife,Pamela. had opened a day-care cenler.Immensely frugal, they had built up a networth of 5600,000. with $150.000 in cash

Realiz.ing that franchising was thefuture - a 101 of people were gelling richowning fast-food re:..taurants - Wal..hhad contacted several major fr.mchison.including McDonald's. nurger King gavehim the most enlhusiastic re"ponsc. offel­ing him a rest:lUranl in southeasternI\tlanla: "They said. 'This is the $Iore fOIyou.' . . . Nol knowing llIuch ahrn.n Ihebtl$illes~. I wa~ naive. TIml i" .....hy I ",;I~

ea...ily taken advantage of. IlnI<;ted BurgerKing."

AL DIAZIHe'Old Staff

Robert Zarco, attorney for minori~franchisees suing Burger King:"It is surprising that after all the civilrights movements in this country. anestablished corporation would. . . usediscriminatory tactics against its ownbusiness partners - the franchisees."

knowledge of strategy. They had no deci­sion making power."

Two former BKC managers, however,say that BKC was trying to get as much asit could out of stores that were headeddown the tuhcs. One was Walsh's firststore, on Lawrenceville Highway. Anotherwas No. 899. One of the former managers,Greg Butler, called its location "real, realtough. "

Juan Abootorabi, former district man-

Walsh says BKC officials told him thisstore was his only chance: "They told meif I did not buy that store, and it was theonly store available, I would not be get­ting any more."

Giresi, the corporate counsel, says thatWalsh voluntarily agreed to buy No. 899:"He could have walked away from thedeal."

When Walsh bought the restaurant for$325,000, wilh $35,000 down, he and aBKC manager did a pre-closing walk­through, checking equipment and fumish­ings. Walsh noticed spoiled meat in thefreezer. He asked that it be removed.

The next moming, Walsh saw that therotten meat was still there. Other thingsweren't, he says: A toaster and amicrowave oven were gone, replaced byolder, mndown models. A broiler, freezersand coolers weren't working. The sodamachine line had hurst. and symp coveredthe floor. "Burger King had pulled a trickon me," Walsh concluded.

Abootorabi says that he can recall onlytwo pieces of old gear swapped for new atNo. 899 - two reach-in freezers - buthe says that much of the other equipmentwas old and BKC had told him not towaste money repairing it. A week beforethe closing, to dress up the place forWalsh's inspection, he says, BKC fixed afew shingles and things, but that was all."It was like a Band-Aid on a wound."

Through his lawyer, Walsh complainedloudly, and some of the broken-downequipment was replaced by machines thatran for a little while before they, too,broke down. "It took eight monlhs to getall the equipment back. I never did get themicrowave."

At first. Walsh's sales went up. Thenthey slumped 5 percent. He couldn't fig­ure out why. One day, he drove around tosee if there was new competition. Hefound a brand new restaurant 2 1/2 milesaway. It was a branch of a major chain,owned by the parent company. The chain?Burger King.

)\

officials down­played the store'smndown conditionand emphasized anearby industrialpark, which theysaid would bedeveloping soon,greatly increasingNo. 899's sales.They showed himsales and expensereports for the past13 months. He saysno mention wasmade of Richwayclosing.

which had severalhundred employeesand broughl muchof the traffic into thearea, was doing sobadly it would soonclose.

Giresi says hehas no specificinformation. butcan't imagine thatwould he tme: "\don't know how itwould have come toour attention beforeanyone else's'"

To Walsh, BKC

ferred them to loca­tions where theycould make a differ­ence. What's more,Abootorabi says, heand olher BKC offi­cials knew the next­door Richway,

ager for No. 899,says, he put his bestrestaurant managersin the store, tryingto improve sales,but nothing they didworked, andAbootorabi trans-

A Band-Aid on the Wound

Why would aknowledgeable busi­nessman be so trust­ing? Why would henot be as suspiciousas if he were buyinga used car?

In fact, there is anambiguity in therelationship. For onething, used car deal­erships don't makemoney for everymile a customer dri­ves his car. Once thesale is final, thefinancial incentive toplease is over. But inthe franchise busi­ness, the seller andthe buyer have akind of partnership,both profiting fromlong-term success.Robert Zarco, attor­ney for many BurgerKing franchiseescalIs it "a joint ven­ture" - the corpora­tion provides train­ing and marketadvice and the fran­chisee pays the cor­poration for years tocome.

Giresi, the BKCcounsel, sees it dif­ferently. He saysthere is an "arm'slength relationship"between the corpora­tion and the fran­chisee. Each tries tocut the best deal itcan. In other words:Buyer beware.

Still, CoriZywotow, BKC'svice president ofcommunications,says that in no way would the companywant to sell a bad restaurant to a fran­chisee: "We care about our franchisees.And we want them to succeed."

Why then sell a restaurant in a "poorlocation"? Giresi says that the memowriter "was a junior level financial ana­lyst. She was not in a business-decision­making capacity. I reaJly don't know whatshe means. I do know it was not our strat­egy to put franchisees into failing situa­tions." He adds that the other former dis­trict managers who have made conmlentsabout Atlanta don't know what they'retalking about. He says they were "fairlylower level employees without any

Giresi ~ays ii's COIlXlrate policy fornearby restaunlOl OWllers to be nOlificd ofnew Slores, and he has no reason tobelieve thal the policy wasn't followed inthis case. BUI Wal.~h says he was shocked:"They didn'l even tell me the Slore wasgoing to open."

The Competition

The new Burger King affecled morethan Walsh's slore. II was only a mile anda half from allolher reSlauranl, No. 247 onNorth Druid IliII~ Road, which had beenpurchased by Thad Dcas after he lurneddown No. 899. Dc;l.s had doubts aboutlhelocation - it W;'Ll; in lhe Illiddle of a block- but he says he was laid by BKC thatthis was his "'ast o~ion" and the areadidn't Sttmtoo bad - a racially mixedarea, with some while-coll.u office build­ings nearby. Deas bought lhe store for$410,000.

He put down S2I,(X)(). and had anotherS21.000 in cash to pay for insurance andsupplies as soon as he took over lhe store,"1 dumped all my money into it. 1didn'thave any reserves."

A few days before closing, BKCinfomlCd Deas thai it planned 10 build anew company-owned slore only a mileand a half from his. Dcas says he was toldlhe new store wouldn't affect his sales.and if he wanted 10 buy No. 247, he need­ed 10 sign a f('lnn sl:uing he didn'tlhinkthe new place would harm him.

Deas didn'llike Ihis, bUI "I had 110 job,nothing c1.l;e allhis point." Besides. "1couldn't believe Ihat Ihey would deliber­alely set out 10 do me wrong," Dcassigned.

COlltraclu:llly. BKC l'Iluldput :1 Ill'W slul'e :mywl1('I'l' itwanled, til;(' McDonald's andl1Iost olhcl' fast-f(~wJ ehail1~,

Burger King offers no territorialexclusivity to:l franchi.~ce. IfUKC wanl~ 10 huild a (l'statITantacross the strt'ct from" fmn­chisee. the COIuracl permits it.TIlis freedolll has causcdIrclllendous howls over theye.lTs by franchi~ces. and Flori·da and ulher st ..I,'s have "oll.~id­

ered kgislalioll to require fr:llI­ctlisors to sellaT:ltc r('sl.lUrantsby al least Ihree miles, hUI atpresent franchisors hold allillecards.

As wilh Walsh, Dcas w;l.lkedinto his new slore 10 find bro·ken·down equipmenl. "Therewere innuendoes from the kidssaying" 'TIlCY changed thi ... ' ,.Soon after laking over. Deassays. Ihe bl'Oilcr stopped work·ing in the middle of lunch.which was a real killcr. sillce

virtually all BK sandwich mealmoves Ihrough the broiler..

Even with the equipmenlproblems. Deas managed 10increase sales for the firsllhreemonths. Then the new companySlore opened, Deas' salessagged lie asked for help frmllhcadqu:llll'l'S "'Tell mc whalI'm d(lin~ wrong," he ple.a<kd.A rnarkctin~ man carne out."I-Ie looked at all my banncrsand postcr~. lie said everything1 was ~ling. wa... ril!hl."

Sales fcilio S825.<XXJ - farbeJow the (lfojcr1ions he hadbcc=n shown before buying, lieSlopped takint any money forsalary and got ;l. second mot1­gage Oft his house. I-Ie wasworkin~ 16 hoors a day. sc\'endays a week. without vacatiOfls,

Sc"er;l.1 miles away, Walsh.too. was struggling, 11K' areaaround No, 899 was dying TIleRichway c1osrd. A Zayre"sclosed, TIlCn a nursery, a bank,a supcnnarket. a gal; station. Onthe other side of the beltway ­the "while" side -a McDon·aid's opened. So did a Shoncy'..and a Sam's Warehouse, Fewerslon~s mcanl reduced Irafflc,which meant fewer cuslomcrsat No. 899, Wlml's more, Walshkepi learning the store was inworse shape than he had rC;II­ized. I-Ie purchased the reslau­rant in Ihe sumlller. Later, hewas shocked 10 learn that noteven the furnace worked. He

says an employee lold him, "We haven'thad heal in two ye:lrs." Says Wlll.~h: "Youever hCimJ of:l UurF,er King with no fur­nace? I call thai a trick."

Giresi ~ays he can't imagine thai arestaurant without a furnace could last fortwo years in Atlanla, where winters gelbelow freezing.

For five years. Walsh says, he workedrf(illl 5 a.m. to II p.m. six days a week.Like Dcas. he cut his salary back 10 nOlh­ing. He Iried direct mail coupons and any­thing. else he could think of. Nothingworked.

"Set Up to Fail"

When Dcas and Walsh complained.nKC tried 10 placale lhem. 1llc eorpora­lion paid for a "Iight and bright" re·nlOd·cling of Deas' exterior. For Walsh, BKCmad::: repairs to the roof. parking lot andother items that tOl:lled $93.000 - plusgave him training and staff assist:lnce.Walsh S<lys much of the money was forlhin!!s that should ha\'e been fixed beforehe boughl Ihe reslauranl. Both he and

[)cas say Ihatlhe assistance didn'l helpthem. They asked that they be allowed toexchange their reslaurants for stores inbeller locations. Both were lold no.

Burger King sued Dcas for fallingbehind in his payments, In 1991, deadbroke. he gave his re.... taurant back to thecorporation. Today, No. 247 continues tooperate as a company restaurant.

Giresi, Ihe corporate counsel: "Thiswas a viable location. proven by the factthat we're slill operating it successfully,11lC fact that it was not successful didn'thave anylhing 10 do with the corporationfailing him."

Crnig Farley. a former BKe manager.says BKC dumped loads of money intothe restaurant after Deas left. installing aplayground, which can cost up to $50.000and an extra-tall sign. which can cost$75,000. The parking 101 was re-done wilhnew, anti-crime lights. "If Thad Deas hadmore capilal. ,. Farley says, "if he hadbeen able to remodel. 1think he couldhave made it."

Out Walsh had several hundred thou­sand in reserves, and he, 100, went broke.Both his stores are no longer BurgerKings: No. 899 is now a burned oul hulk,and lhe other is a Dairy Queen. For awhile. Walsh bcc;l.me one of24 minorityfranchisees ia a c1:lss action lawsuitag:linst BKC filed in 1989. Most of theparticip:lIlls were black. but lhere wereaLso the Triana brothers in Chicago alleg­ing discrimination ag3inst Hispanics andIwO Pakistanis operating in Allarlla, I.D.Agad and his brother-in-law, I.Q. Oal·agarnw:lla.

In coun, Burger King pointed out oneof ils l:lrgest franchisees, Manny Garciawho owns almost 60 stores in Florida andGeorgia, was Hispanic, and the corpora­liolllllaintained lhal the franchisees couldpoint 10 110thinF, on paper Ihat indicated apallem of systemic discrilllinalion. JudgeKehoe agreed, and decreed thatlhc indiovidual franchisees could sue BKC, hut notas a class rellrc~cntillg all minorities.

Along the way, allttle bl;ICk plainliffsexcept Carok Hall dropped out. Most ofthem owed considerable sums to BKC,and many worked out selllclllcnts Ih;lthave nOl been made public, As pan of theagreements, many signed documenls Slat­ing that Burger King had not discriminat­ed against them.

Walsh saw thai tile suit would drag onfor years and cost huge sums in legal fees.I-Ie signed a confidenlial agreenlCnt withBKC, Giresi, BKC's CGunsel, says onlythat "we solved it, to OUI salisf3ctioll and10 Mr. Walsh's satisfactiOIl:'

Perhaps, but Walsh ended up losing hiShouse and all his reserves. For the paSIthree years. his wife has made a lilliemoney running the day-<are center 3nd hehas lried to pul his life back together,

picking through the rums of the truSI heused 10 have in corporalc America.

"They had set us up 10 fall," he said ina deposillon. "A while franchisee wouldnOl havc been lied 10 by Burger King

, A white franchisee would nOI havehad hiS equipmcllI stolen. . I believeIhlll due to the PUSH covenanl, Ihat Iherewas a tremendous amount of resellllllenlamong the middle management in thaIIhey could not get Burger Kings Oc\.:auscthey were being "warded to blads.·'

BKC executives SOly that's 1I0mcnse,bul three formcr mIddle-level managershave said in deposilions Ih:lt il was a defaciO corporate polley 10 put bl;lf.;k fr:lIl­chisces inlo poor black inncr-city ncigh­borhoods. Aboolorabi says he nevcr sawthis policy wrillen dowl\- "1 don'l knowif anybody would be thaI stupid, hIli youcould see it."

David G. Hyland, anolher eX-l11:lIlager:"(Ihink the reason would be by pUllingthe minority franchisees in those ncigh­borhoods, they felt like they Inlght be able10 do a betler job associ<lting with alldrelating 10 the black neighborhood!>..Maybe Ihe only people willing to takethem :lre minorities."

Tropic tracked down two blad. fonnerdiSlriu managers who had a lcss benignthcory,

CJaig !'arley' "Burger King has a ten­dClley 10 sell dogs to minorities." A dog iscorporale p,1I 1,lIlce for a poor-perfonningrCSlilunulI.

Joe NIX: "The ullimale idea was Ihat aminority would be successful in a minori­Iy area. They'd say, 'You can go therebecause you are black.' I never saw it inwriling. BUI Ihe bOIlOlll line WilS thaiwhilcS should be in the white suburbs, andblacks should be in black areas, Thai wasdefinitely Ihe allilude."

BKC officials say none of this is tnle,Giresi says none of these managers was ina policy·m:lking posilion, ~Uld it wasalways BKC's policy to treat black fran­chisees the same as whiles.

But Butler. anolher fonncr BKC man­ager, says while former corporatc execu­lives had an advantage over other fran­chisees when it came to selecting loca­tions. They had inside infonnation­studIes of fUlure traffic pallerns andneighborhood studies that wcre nOi sharedwith most franchisees.

Giresi: "The very nature of their jobsmny have given them infornlillion aboulpallicu];lr arcas, but il doesn't me:lll theywere favored."

Ilowever, while Deas and W<llsh werebeing offercd dubious n:staunlllis in Ihemid-1980s, several while franchisees wereslarling "l' in prosperous, predominantlywhite suburbs, Greg 0011011, a formerBKC execulive viee president, was sold acompany store in Conyt:rs, which is in an

ideal 10Cillion, on a broad road fillcd wilhmalls. lllultiplex movie Ihealers and aWalman. He has since expamkd to scver­al other reSlaurants in the same area. SkipHoffmann, anolhcr fonncr vice presidelll,hilS developed six suburbnn restauranh,five ofthcm in Gwinnetl Cl)Ullly, a whitesuburb:m arca lhat has become onc of thefastest growing counties in America.

.. 11IelJ had set usup to fail." saidHoward Walsh.

"R whitefranchisee wouldnot halle been lied

to blJ BurgerKing .. Rwhite

franchisee wouldnot halle hadhis equipment

stolen'"

Hoffmann says BKC gave him twochoices: a site in GwinnclI County or inanother suburh, and hl: chose Gwinllellbecause thai's where his home was. !kwaS nevcr offered the loc;Hions Ih<lt werepresented to Dc"s and Walsh. lie says hcpurchased his firsl rcSlilurant wilh a spe­cial corporalc loan availablc to fonnerDKC executives, but his olher rcslauralllSwere bought wilhoul corporate help. Hoff­mann adds Ihat B KC never trkd to swilchold equipment for new in his stores­'"I've 1lt'1't'r heard of that happening. (IllY'

where,"

Making It Big

Burger King says it keeps no statisticson what percentage of franchisees fail, butil likes 10 imply that very few do, The

brochure it ~nds 10 prospective fran­chl~ces quotcs a survey that states 94 per­cent of IIwc!>lors in alltypcs of franchisesare sllccessful.

David Talty, a restauranl consullantwho teaches at Florida International Uni­versity, says faSI-food places in generalare aSlonishingly sllccessful. While eighloUlof 10 new unaffiliated restaurants gobroke, the failurc rate of big chains is only2 or :\ percent.

African Americans entcrcd the BurgerKing syslcllllhinking Ihcy were buyinginto a sllre Ihing, btU it didn'tlurn Qullhalway. Ilow many (:liled? Tropic called 60black franchisees who were in the syslemin December 1990, The findings: In thepast3 1h years, 15 (25 percent) have goneoUI of business. Another two arc in bank­ruptcy courl. Yel another two said they,too, would have bccn out of business ifIhey hadn'lthrealened BKC with legalaClion and been given prosperous subur­ban stores to shore up thclr failing inner·city restauranls. At Ieasl nine others arestruggling 10 survivc with a single Slore,

Many of thc successful black fran­chisees, who have I:lrge numbers ofrestaurants, have expanded rapidly onlysince 1989, when Ihe daSS-OIction lawsuitwas launched.

TIle Iisl of casualties is long. SamPricc, a Dolphin running back in the '60s,sank his pro-football eamings inlo twoBurger Kings 111 Michigan. Leroy Kelly,the famed Cleveland Brown, went intopanncrship wilh his sisler ill an inner-cilyPhiladelphia restaurant.

Rob Wilh~lIns, who in 1972 becameone of Ihe first blacks 10 own a BurgerKmg. was femul'eJ in Ebony and Jet as asuccessful black enlrepreneur. For a longIllllC, he survlwd, but his slores grew oldin deterioraung DClroit neighborhoods.1IId he had no moncy 10 rCll10del thclll: "Iended up broke, with absolulely nothing.Mentally, I was JUSI dcslroyed." Thoughhe's a college graduate, he now ekes oul aliving as a security gU:lrd.

Then Ihere's Anna lIollls: She and herhusband, Tom, r:l1l a reSI,lInanl in a blad.area of Washington, D.C. A fcw monlhsafter opening, Tom was shot dead and oneof her SOliS was wounded in :l restaurantholdup - by a disgmntled seCurily guardthat they had had 10 fire because theycouldn't afford him. Mother of five, AnnaHollis vowed to carry 011. For years, shekepI the restauranl going. She was fea·lured III Jct and The Washinglon Po!>t,which used the headline: Maki"g lr Big 111

lilt' Ilurger Bi~ A Reagan slaffer senl hera congralulatory nOll' on While I-louse sta­1l0nery, and Hollis t:ecamc a much-in­demand speaker, going to places like pre­dominantly black Howard University,where she advised business sludellts Ihallheir beSI chance al success was throughfranchising,

•

Still. it was lough going. The neigh­borhood kepi deteriorating. Twelve limesshe herself was robbed in the Slore. Manycustomers avoided Ihe place. Decent helpwas no longer available. The employeesshe could gel weren't interested in keep­ing the place clean, and she began count­ing the inventory twice a day, 10 seewhich shift was slealing from her. Then arecession hit her store's run-down neigh­borhood. and she slid deeply into debt.

Hollis begged Durger King for a bellerlocation, but her debts were so large shewas lold she didn't quality. She joined thelawsuit. eventually sCllling for an undis·c1o~ amount. lIer store is now closeddown. Hollis' area was panicularly hardhit: Of nine black franchisees operating in1990 in BKC's Washington-Philadelphiaregion. seven have gone out of busincssand ,Ill eighth is siruggling to survive withonc inner-city restaurant.

A Healthy Skepticism

of Washington and is head of the MinorityFranchisee Association. says that heknows minorities had a tough lime withBurger King inlhe '80s, hut says it haschanged since Grand Met took over in1989: "I think a lot of work needs to bedone. but the framework is sel for iltowork welL .. ,Their system haschanged. their mood has changed. It'sbeen like day and night."

Since Grand Met and lhe I:lwsuit­both entcred the piclure in the same year- blacks find they are being offered bellerlocations. Clyde Younger bought his fir-a:-.Iore in 1989, the year the lawsuil slarted.and ended up with two excellent locationsin M;lssachuselts - bolh are in foodcourts in large malls, where there is a 101of Irnffic. And hc's about 10 gel a Ihird. atthe BoSton airport. which should be a goldmine wilh its caplive audience. "If you gellhe proper location," he says, "Ihis willwork out very well for you."

ment. "I don't know alltlte delails, I justknow whal the result is. (think BurgerKing recognized somelhing needed to bedone 10 change it."

So BKC recruited Eanes, the success­ful Cleveland operator, Eanes was recent­ly sold Ihree company stores in the pre­dominanlly while Atlanta suburb of Mari­ella - an area where Walsh, Deas andother bl:lck franchisees of lhe '80s werenever invited to buy, Eanes says he plansto build seven more Burger Kings there.

Meanwhile. some black franchisees aregoing back into the inner city - with suc­cess. Singlelcary and Daniels have care­fully selected siles in Chicago. Milwaukeeand DelToit. and they have huge sums toinvest

"If the structure of the deal is righl."says Daniels, a former banker. "you cando OK." And sufficient capital is impor­lant. she adds: "When you're highlyleveraged. it's hard to make money." BOlh

Singleteary and Daniels also have a mixof reSlaurants - including suburban andeven small-Iown -Ihal can carry themthrough if one or IWO stores has a roughtime.

Meanwhile. Burger King continues towill publicilY for its efforts 10 promoleminority ownership. Lasl December. BKCannounced a five-year program of $100million in loans 10 minorities and women.to help them buy reslaurants and otherassistance. A Herald editorial applaudedthe move: "The commitment is extraordi­nary."

But five monlhs after the program wasannounced. minority franchisees knownOlhing about it. and even those who sayIhey have beentrealed well by BurgerKing are wondering what's happened tothe money.

Hood-Phillips. the diversily adviser forBKC, says lhalthe delay has been because

Promises, Promises

Even though BKC denies that it didanything wrong in Atl:mta. it has beenchanging its policies there, After lhe fail­ures of Dcas. Walsh and others. only onehl:lck franchisee remained in Atlanta:Ernie J:lckson, who had OIlC Slore ncar amall freqllerned primarily by blacks.

111 1989. IJKC offered Joe Nix a store011 Challlhkc Tucker Roa<!. and Nix wasready to 1,Ike it. But someone al 13KCMiami decided the store was not a goodrisk. Nix was warned, and a few monlhs1,ller, Ihe store wa.~ shut down. A replay ofthe Walsh scenario was avoided. (Nix hasended up with IWo profitable BurgerKings in small towns in South Carolina.)

"There aren't manyblacks at the uppermanagement leuet:'says black former

district manager Joe Nix. "If there had beenablack uice president. rmsure he wouldn'thaue picked an inner-city dog'"

In recent years. il seems Ihal someblacks have become more cautious aboutlaking whal BKC offers. If nothing else.federal regulalions require franchisors tolist pertinent lawsuits against them in Ihethick Unifonn Franchise Offering Circu­lar sent 10 all prospective franchisees.:lnd the mention of lawsuits by minori­lie.. 1I:lvc caused sOllle would-he buyersto (:heck around.

Louis Kyles. who has three slores inChic;lgo. S:IY." he was offered stores in theilTllKlVerishcd Soulh Side. hUI lhey wcre"really bad. acros.s frolll the projects. Wewent round and round on those sites.They've cIO"Cd down those stores now. Iwas fortunate I had lUI :lttomey familiarwith Burger King.... lie told me. thesewere situalions where you never get thecash now."

In reccnt years. some major blackinvestors have come inlo the system. TIleyhave more money behind them, so theycan buy muhiple restaurants. Stephen Sill­glctcary. a Chicago lawyer. has 15 stores.Val Daniels. a fonner banker in Milwau­kee has 32, Mike Eanes in Cleveland has12. This kind of Si7£ allows them towealhcr financial and neighborhoodvagaries tiwi killed off one-store ownerslike Dcas. -111 is new breed of black entre­preneur ,llso has a heahhy toughness andskepticism when dealing with BKC,

"We have to SlOp making deals jusltoget inlO Ihe game." says Singlclcary, vicepresident of the MinorilY FranchiseeAssociation.

Eancs: "I tell them what I wanl. I don 'Iaccepl what they want. ... Me and Burg­er King have had somc blows. butlheyknow where I'm coming frolll.·'

Druce 1:1ylor. a fomJer San Francisco4ger who now has three slores in Ihe Slate

•

Aftel'" Thad Deas W"ent out of business. the company pumped moremoney into this Atlanta Burger King, building a new playground andextra-tall sign and improving the parking lot.

of government red tape: The programc.an't be implemented until it's included inthe fonnal documents sent to all prospec­tive franchisees.

But Clyde Younger, a successful blackfranchisee in Massachusetts, remainsskeptical: "You'd think the programwould be outlined before it's announced."

The Buddy System

Burger King isn't the only companycriticized for failing to come through on apromise of minority opportunities. Blackentrepreneurs went to Operation PUSH inthe early '80s, complaining that they hadvirtually no chance of getting one of themost lucrative business opportunities inAmerica: a car dealership. PUSH got FordMotor Co. to promise to greatly increasethe number of its black dealers.

Ford selected blacks with entrepre­neurial skills and money to invest. Theyput them through a two-year training pro­gram then offered them dealerships. Now,

a decade later, the program has led to aspate of lawsuits. The basic allegation isthat trainees were offered dealerships onlyin bad locations - usually small lownswhere there weren't enough customers tosupport a dealership. Ford says it has donenothing wrong - in fact, it boasts that ithas more black dealers than GeneralMotors and Chrysler combined - but ear­lier this year, an Alabama jury found thatFord had fraudulently lured a black dealerinto buying a dealership in Selma. Ala.,that caused him to go bankrupt within twoyears. An economiSI testified that 40 per­cent of black Ford dealerships were goingunder - this in a business where, afterinvesting hundreds of thousands, peopleexpect to be set for life. The jury orderedFord to pay the dealer $ I 0 million.

What's happening here? Have Ameri­can corporations really been pUlling blacksin places where they knew they were des­tined to fail? Perhaps, in some instances.In other cases, a more subtle kind of prob­lem may be at work. II could well be that.even if there is no malice, even if blackswere not intentionally put in bad areas.they would still have a problem.

Wayne Patterson, spokesman for dis­gruntled minority Ford dealers. says thattop Ford executives wanted to honor thePUSH covenant, but "there was a middlemanagement level that didn't get aboardon this.. . . The really prosperous dealer­ships never become available, becausethey're passed on in the family." And so,to fulfill the covenant, middle-level man­agement sold what was unwanted - gen­erally, dealerships that were struggling orunprofitable.

What if Ford decided to start a newdealership in a prosperous, expandingarea, such as Orlando? Panerson says it

would undoubtedly go to an old buddy ofa Ford executive, in a deal done quietly ata country club.

Dave Smith, Ford's manager of minor­ity dealership operations, agrees that onlya limited number of dealerships becomeavailable, but rhe company examines themclosely for profitability before sellingthem to minorities. He says the buddy ys­tern has nothing to do with it, but if a newdealership opens up in a place like Orlan­do, it generally will go to an alreadyestablished dealer in the area. "It takes somuch money - $4 million or $5 million- to do a deal like that, and it can take along time to become profitable."

When Smith is told about Burger Kingfranchisees complaining about being putin black neighborhoods, he says: "Wetried that in the '70s. Tne idea was blackswould buy from blacks. We got awayfrom that really quick."

At Burger King, Joe Nix, a districtmanager before becoming a franchisee.says he was asked to help flOd locationsfor blacks. to fulfill the PUSH covenant."It was hell to get those goals accom­plished. No one gave a damn," he com­plains. Nix says he found a good site inSouth Carolina, bUt someone in the hierar­chy decided the site was so good it shouldgo to a white franchisee he knew.

"That was a purely racial issue." Nixsays. But perhaps not in a conscious way.It could have been, Nix acknowledges,that the official wanted to give the site toa buddy, and since the official was white.his buddy was likely to be white. This ishow the good 01' boy network operates.

People at the top help out the people theyrub elbows with.

"There aren't many blacks at theupper management level," says Nix. "Ifthere had been a black vice president, I'msure he wouldn't have picked an inner­city dog."

Is there life after Burger King? Theambitious, hard-working blacks whofailed are still trying. Howard Walsh isthinking of becoming a college professor.Thad Deas is managing construction forBoston Chicken after going on unemploy­ment for a while.

This is a group who won't stop. Con­sider Ann White. She and her husband,Arthur, had four Burger Kings in NewEngland. the last two bought with nomoney down. The debt was too high. Asthe stores collapsed. so did the Whites'marriage. After the divorce, Ann movedto Atlanta and went into sales. She lovesher job, but she doesn't like working forsomeone else. ''I'm still looking to havemy own business again, run by me,myself and l. I'm thinking of a car dealer­ship." •

JOHN DORSCHNER is a Tropic staff""rileI'. His most recent star... was onOceania, a libertarian l/fopia.