The Reason Denny's Is Being Sued By A Former NFL Player

Update 9/6/22: A Denny's spokesperson reached out to Tasting Table to provide the following statement: "Denny's is pleased that the court is aligned with our view on the matter involving Mr. Thompson and has decided to deny his motion. Denny's prioritizes diversity and inclusion at every level of our organization, and we are proud of the results this has yielded and will continue to yield moving forward for our brand. Denny's success is tied directly to the success of all of our franchisees, which is why we make every effort to support them and their operations. We will always seek to foster a diverse business and look forward to continuing to grow our community of franchisees with inclusion as a core tenant."

Denny's and the subsidiary under which it does business with its franchisees are being sued in Denny's home state of South Carolina by former NFL player Donnell Thompson. An Indianapolis Colt for many years, Thompson currently co-owns two Denny's franchise locations in partnership with former New England Patriot Ron Wooten, per Nation's Restaurant News (NRN). Thompson and Wooten's company, RWDT Foods, alleges Denny's is in breach of its franchise agreement with RWDT, according to a press release issued by Thompson in his capacity as President of RWDT on September 1, 2022.

Before we can get into why these former NFL players are suing Denny's there's a critical bit of backstory to cover. It begins with the fact that Thompson and Wooten aren't just former pro football players; rather, over the course of at least two decades, the two have become seasoned veterans in the franchisee space, with 30 restaurants in their collective portfolio, including a number of Checkers and Rally's franchise locations that they own in partnership through another company, Checkerboard Foods LLC.

Although RWDT owns just two Denny's franchise locations, one in North Carolina and one in South Carolina, the lawsuit appears to arise out of a different Denny's franchise location — one that RWDT opened in 2013 (via Gainesville Times), and which has since closed, per Foursquare. Specifically, the former NFL players are seeking equitable relief against Denny's for actions taken starting in 2021 in connection with the opening of that first location.

In 2021, Denny's claimed RWDT had breached its franchise agreement by failing to satisfy its pre-opening training covenants – when RWDT opened its first Denny's franchise over a decade ago, per an RWDT press release. RWDT responded by making "every effort to cure" the alleged breach, only to be rebuffed by Denny's, the press release goes on to say, with the upshot apparently being that Denny's has taken steps toward terminating RWDT's franchise rights. In the statement, Donnell Thompson was quoted as accusing Denny's of "ruining our financial standing [and] jeopardizing our business credibility and reputation." The company owned by two former NFL players now seeks a temporary restraining order to stop Denny's from taking further action interfering with RDWT's status as a Denny's franchisee.

Pre-opening training for Denny's franchisees involves a significant time and money commitment by the franchisee – in addition to any other franchise-associated fees and costs, according to Denny's Franchise Disclosure Document. These are hoops that Denny's requires all franchisees to jump through. However, Thompson's attorney, James L. Walker, says that Thompson, "an African-American ... was required to jump through hoops and hurdles unlike other franchise owners." Moreover, up until he received the notice of default from Denny's, Thompson's contributions to Denny's bottom line had been significant. He had purportedly been held up as a "poster child" for the chain's campaign in recent years to rid itself of a reputation it had acquired for racist policies.

RWDT has what some might call an admirable record as a Denny's franchisee (via press release). Denny's, by contrast, has battled racism claims for decades. A 1994 class action resulted in Denny's paying $54 million in damages to thousands of Black customers whom the company and its employees were accused of charging higher prices and serving less often than white customers, according to The New York Times. In the aftermath, Denny's apparently did such a good job at rehabilitating its image that its efforts were lauded in a 2000 paper published in the Journal of Organizational Excellence.

However, by 2020, Denny's was called out once again for alleged racism directed against Black customers, via Essence. The following year – during which Denny's also initiated the action that stands to terminate RWDT's rights as a franchisee – Denny's committed to improving its workforce diversity (per Harvard Business Review). Although its efforts were addressed primarily to its relationships with employees and suppliers, in June of this year, Denny's announced its commitment to fostering Black franchise ownership in partnership with the Pathways to Black Franchise Ownership Program (via Denny's press release). Nevertheless, Donnell Thompson maintains that Denny's "inequitable and unlawful treatment of RWDT and its owners" belies a different motivation: to drive him, a Black franchisee, out. 

Denny's, for its part, claims it "made every effort to work with Mr. Thompson" (via NRN).