Making good on a pledge to increase economic opportunities for black America, the corporate owner of Denny's restaurants announced yesterday the sale of 17 franchises to an African-American-owned company in Atlanta.
The agreement with NDI Inc. -- a young enterprise that owns Blockbuster video stores, a manufacturer of fast-food tray liners and a hair care company -- also provides for the purchase of five more franchises in 1995 and the construction of 25 new Denny's restaurants over five years, according to officials for both firms. The stores are located in New York and New Jersey.
Neither company would disclose the purchase price of the franchises.
"We paid fair market value," said Richard T. Venegar, a member of NDI's board of directors.
"This agreement was a good business agreement, a solid business agreement," said Karen Randall, a spokeswoman for Flagstar Companies Inc., Denny's parent owner.
The NDI agreement comes within months of a May settlement between Flagstar and thousands of Denny's customers who sued the Spartanburg, S.C.,-based company alleging discrimination at its restaurants. Flagstar agreed to pay $45 million to restaurant patrons, including a group of Secret Service agents who claimed they were mistreated at an Annapolis Denny's in 1993.
The sale to NDI also follows a much-touted July 1993 pact between Flagstar and the National Association for the Advancement of Colored People to increase business and employment opportunities for blacks. Flagstar pledged to increase the number of black-owned franchises over seven years and planned to have eight such owners by the end of 1994.
With one deal, Flagstar has made great strides in meeting and exceeding its franchise goal of 53 new minority-owned Denny's by 1997.
"I am extremely encouraged by what they are doing," said Kelly M. Alexander Jr., a North Carolina businessman and member of the NAACP board of directors who is monitoring the Fair Share Agreement with Flagstar.
Flagstar is one of the nation's largest restaurant companies, with $2.6 billion in annual sales, 1,500 Denny's restaurants in 48 states, nearly 600 Hardee's, and two steak and char-broiled chicken chains.
In addition to the NDI deal, Flagstar announced yesterday the establishment of a "fast track" program to develop 15 first-time franchise owners. Candidates will receive educational opportunities and training at a Denny's restaurant. At the end of the program, participants will be offered a franchise with possible financial assistance.
As Flagstar was signing the agreement with the NAACP in the summer of 1993, it began negotiating with NDI for the purchase of several of its corporate-owned restaurants. Founded in 1991, the Atlanta firm earns about $25 million a year from its three businesses. The company is the largest African-American franchisee of Blockbuster video stores, owning 23 stores, including 10 in Baltimore County.
The deal with Denny's should double NDI's yearly revenues, said Mr. Venegar. The 17 Denny's restaurants to be purchased by NDI earn an average of $1.4 million a year, slightly more than the corporate-wide franchise average.
"We're buying good stores with a lot of upside potential," said Mr. Venegar.
Mr. Venegar said NDI hoped its relationship with Flagstar will result in expanding sales of the paper tray liners it manufactures.
"Our goal is to become Denny's best-run and ultimately largest franchise operator," James Holden, NDI's 37-year-old, Harvard-educated president and chief executive officer, said in a statement yesterday.
The company had an experienced and diverse team to accomplish that goal, Mr. Holden said. Leon Wright, NDI's 51-year-old chairman, is a former product manager at General Foods who previously owned several Checker's restaurants in Atlanta and Philadelphia. The chief operating officer of NDI Foods Inc., the company arm that will operate and manage the Denny's, is Charles Davis. He is a 25-year veteran of the fast-food business, Mr. Venegar said.
When asked about NDI's commitment to employ African-Americans, Mr. Venegar said the company was a "multicultural organization."