In April of 1988, a married couple named Billy and Henry Elliot, both managers at Shoney’s, were fired. Their offense, according to the lawsuit that followed, was refusing to go along with the company’s discriminatory hiring practices. They lost their jobs for refusing to discriminate, and they went to a lawyer named Tommy Warren, a former college football star turned civil rights attorney in Tallahassee. On April 4, 1989, Warren filed a class action in federal court in Pensacola, Florida.
It was called Haynes versus Shoney’s. There were nine named plaintiffs: five black employees and four white managers. The NAACP Legal Defense and Education Fund joined the case alongside civil rights attorney Barry Goldstein. The plaintiffs initially sought more than half a billion dollars.
What they alleged was systematic racial discrimination across the entire company. Not isolated incidents. A system. The claim was that Shoney’s refused to hire black applicants or deliberately confined them to jobs in the back of the restaurant, dishwashing and kitchen work out of the customer’s view.
Managers who spoke up or resisted were allegedly punished or pushed out. White managers were part of the plaintiff class specifically because they said they had been retaliated against for objecting. And here is the detail that still stops people. Testimony alleged that Dan Nerr, the company’s leader, told managers to quote “lighten the place up” in restaurants where he felt too many black employees were working.
Other managers said the code word was that it was “too cloudy” and to “lighten it up some. ” Managers were allegedly instructed to mark black applicants’ job applications by darkening the letter O in the Shoney’s logo on the form, or the letter A in the word “application. ” That was supposedly how they flagged which applications to set aside. The case later inspired a book called The Black O by Steve Watkins, published in 1997.
Here is the part that no other video about Shoney’s tells you. By the early 1990s, a man named Leonard Roberts was CEO. He had already turned around Arby’s and had a reputation for fixing broken companies. Roberts became convinced that Shoney’s was going to lose this lawsuit badly.
The board did not believe the allegations. Roberts did. So he went to Dan Nerr’s house. According to Roberts, he sat across from Dan Nerr and told him he had 24 hours to agree to settle the case for $130 million.
If he did not, Roberts said Shoney’s would join the lawsuit on the side of the plaintiffs against its own founder. Dan Nerr threw him out of his house. The next morning, Dan Nerr agreed, but on one condition: Roberts had to resign. Roberts later said he walked into the board meeting expecting a standing ovation.
Instead, he lost his job for doing the right thing. That detail right there tells you everything about what kind of company this had become behind the warm memories and the breakfast bar. Dan Nerr denied the allegations throughout, but the case went on. In January of 1993, the court approved a consent decree of $132.
5 million. $105 million went to the class. Somewhere between 10,000 and 40,000 black applicants and employees were covered, depending on which estimate you use. Eleven people received the maximum payout of $100,000 each.
The class period ran from February of 1985 through November of 1992. At the time, it was the largest racial discrimination settlement in American history. Dan Nerr personally surrendered stock worth about $65 million as part of the settlement. That was roughly 83% of the company’s total settlement burden coming out of one man’s holdings.
He became a life member of the NAACP. He did not stand for reelection to the board. By March of 1993, Shoney’s bought out the remainder of his stock and he was gone completely. The man who had run everything, who had been the reason every restroom was clean and every hostess smiled and every breakfast bar was stocked by 6 in the morning, was out.
Dan Nerr had been the product. And the product just walked out the door. What he left behind was a company carrying a mountain of debt from the recapitalization and the reputational damage of the largest discrimination case the industry had ever seen. Here is what a company looks like when the only person who knew how to run it is gone.
Between 1986 and 1997, Shoney’s went through six different CEOs. Six in about a decade. Every one of them walked into a company loaded with debt, still dealing with the fallout of the discrimination case, and trying to figure out how to run a chain that had been run by one man’s sheer force of personality for 30 years. In 1997, the founder’s son, Ray Shoney’s Bomb, who was a minority shareholder at this point, launched a proxy fight to remove the current management and board.
He publicly called the food at Shoney’s terrible, his own family’s restaurant chain, and he went on record saying the food was bad. The stock had dropped about 70% over the prior three years. The proxy fight cost the company somewhere between $5 and $6 million just to fight off. In the end, the younger Shoney’s Bomb and a few allies got seats on the board.
But the damage was done. That was money and energy spent fighting each other instead of fixing the restaurants. And if you walked into a Shoney’s in 1987 or 1988, you could feel the difference from a decade earlier. The carpet was the same carpet.
The booths were the same booths. The wallpaper had not moved. Places that used to have a line on Sunday morning now had open tables. The building felt like it was still living in 1986 while the rest of the world had moved on.
And while management was turning over and the boardroom was on fire, all three of those details came due at the same time. The debt from the 1988 recapitalization meant there was no money for remodels, no money for marketing, no money for any of the things you need to do when your restaurants are starting to look tired and your competitors are opening shiny new buildings down the street. And the breakfast bar, the thing that saved them in the 1980s, had turned into something they could not get away from. By the late 1990s, roughly 60% of every dollar spent at Shoney’s came off that bar.
Their own CEO called it an addiction. The problem was buffet restaurants had exploded all over the country. Golden Corral, Old Country Buffet, Ryan’s, dozens of regional players, and those places were bigger, newer, with more items and more space. Shoney’s could not match them.
The buildings were too small, and the money to expand them was not there because of that debt. They were stuck. The bar was their identity, but they could not compete on the bar anymore. Walking away from the bar meant walking away from 60% of their sales.
And then there was the expansion. Shoney’s had spent decades confined to 11 southeastern states. Once they paid that $13 million to break free from Big Boy in 1984, they pushed hard. Too hard.
By the mid-1990s, they were in 34 states. But Shoney’s had a deeply southern identity. Andy Griffith, Jeff Foxworthy, biscuits and gravy, grits, sweet tea. This was a concept built for the Southeast, and they rushed it into markets where nobody had heard of them and nobody was asking for them.
When they started closing underperforming locations, a lot of them were in those new states. You would see a Shoney’s in Ohio or Pennsylvania sitting half empty on a Friday night while the Applebee’s across the street had a 45-minute wait. Nobody up there had the memories. Nobody up there grew up on the breakfast bar.
It was just another restaurant with a bear on the sign. Today, Shoney’s has retreated almost entirely back to the Southeast. Most of the roughly 55 that are left sit in Tennessee, Georgia, Virginia, and the Carolinas. The expansion was a bet, and the bet did not pay.
In 1996, already buried in debt, the company borrowed another $100 million to buy its largest franchisee, TPI Enterprises, for $164 million. TPI brought in 176 Shoney’s restaurants and 67 Captain D’s. Sounds like a good deal until you find out those restaurants were performing about 20% worse than the ones the company already owned. Analysts called it a major interference that derailed the turnaround plan.
They spent $164 million to buy somebody else’s problems. That year, revenue hit $1. 2 billion, but the company posted a net loss of $35 million and closed 75 locations. By 2000, the company was delisted from the New York Stock Exchange.
They restructured their debt, cutting about $149 million off the books. Two years later, Lonear Funds bought the whole company for about $240 million and took it private. They sold off Captain D’s in 2005. Across the South, people started noticing the Shoney’s down the road was closed.
The sign was dark. The parking lot was empty. The bear was not smiling at anybody anymore. One by one, they just went quiet.
In 2007, a man named David Da Voodpor bought the Shoney’s brand through his company, Royal Hospitality. At that point, there were about 282 locations left. He started remodeling, pushing franchising, trying to breathe life back into it. And the count just kept falling.
282 became 165, then 150, then 55. Along the way, they tried everything. They changed the tagline from “classic American food” to “come back to what’s good,” which is kind of an admission that you left. They signed Jeff Foxworthy in 2002 to do TV commercials.
Funny commercials. They did not save them. Da Voodpor has been talking about a return to the glory days for years. Their website still says they are growing fast and expanding.
55 restaurants in a country where they once had over 1,800. Nobody killed Shoney’s. Not really. It was a bunch of things that all landed at the same time, and most of them traced back to the same man.
Dan Nerr built it with his own hands. He set every standard. He checked every restroom. He made sure that breakfast bar was full and the hostess was smiling and the coffee was hot.
And then he pulled $111 million out of the company, left behind a scandal that cost another $132 million, and walked away. And the six people who tried to replace him found out that you cannot replace what was never a system. It was just a man. Dan Nerr was the product, not the breakfast bar.
And when the product left, there was nothing underneath holding the rest of it up. Alex Shoney’s Bomb, the guy who scraped together $2,500 for a drive-in in West Virginia, the inferiority complex guy who broke his nose four times and sold hair tonic and built a name from his own nickname, died on December 6, 1996. He was 81 years old. Two weeks earlier, he had received the B’nai B’rith Great American Tradition Award in Sarasota.
He had a heart attack the very same week. He never saw the proxy fight. He never saw the TPI acquisition. He never saw the bankruptcy or the delisting or the slow fade to 55 restaurants.
He left while his name still meant something good on a building. His wife Betty, the girl he met on her first day at Ohio State, lived to be a hundred.
