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THI, a new franchise co.

Earlier this year when Marriott Corp. decided to exit the family restaurant business, Warren M. Thompson saw a golden opportunity. The Marriott executive structured a deal in which Shoney's Inc. and his newly created company, Thompson Hospitality Inc. (THI), would purchase 40 of Marriott's Bob's Big Boy restaurants. The $17.6 million deal allows the Shoney's restaurant chain to penetrate the Washington, D.C., market, and helps it live up to an agreement with the Southern Christian Leadership Conference (SCLC) to promote minority business development.

Thompson resigned his post as Marriott's vice president of East Coast operations in the host, food and beverage division to become CEO of THI. "I always wanted to own my own business," says Thompson, who has worked for Marriott for the past nine years. "When Marriott announced the sale, I thought it was a good opportunity to pursue. I structured a deal that would help all parties."

Under the terms of the June agreement, THI acquires 31 of the 40 Bob's Big Boy restaurants for $13.1 million. Shoney's acquires the remaining nine restaurants for $4.5 million. The restaurants are in Virginia, Maryland and the District of Columbia.

Washington, D.C.-based Marriott and Nashville-based Shoney's financed the deal. THI will repay Marriott in interest and principal over the next six years.

THI will convert at least 26 of its 31 restaurants into Shoney's within two years. The first restaurant was slated for conversion by August. The nine locations purchased by Shoney's will be converted by November.

THI is the largest of Shoney's four black-owned franchisees and it's fifth-largest franchisee overall. It projects that its 1993 annual sales will reach $40 million. The company also expects its 2,000 employees (70% minority) to increase to 2,800 after all 31 stores are converted.

Marriott was happy to sell to a buyer it could trust. "We devote [10% to 20% of our business] to minority partnerships," says Richard Sneed, corporate spokesman for Marriott. "This was an opportunity to sell to someone we know has the capability and expertise to run the business profitably."

To solidify THI's financial position, THI's chief administrative officer, Darryl B. Thompson (no relation), enlisted 10 to 15 investors to purchase a $2 million stake in the company. Thompson, is a former special assistant to Reginald F. Lewis, chairman of TLC Beatrice International (Ranked No. 1 on the BE INDUSTRIAL/SERVICE 100). He says THI has strong growth potential because, "We're taking Big Boy's restaurants, whose average volume is $1.1 million, and converting them to Shoney's restaurants, whose average volume is $1.6 million." He also says the company will pursue an aggressive television, print and radio marketing strategy to ensure the new venture starts off on the right foot.

"The deal with THI is our gateway to the East," says Betty Marshall, Shoney's vice president for corporate and community affairs. Marshall says the deal is part of a three-year plan to eventually expand the $2 billion, 800-restaurant chain into Pennsylvania, Delaware, New York, New Jersey and Massachusetts. She also says it is part of a $90 million covenant Shoney's signed with SCLC in 1989.

"The covenant we signed with the SCLC is in its third year. Over the three years, Shoney's will put $90 million back into the community in the areas of franchise development, minority business development, employment, advertising, marketing and public relations services, community service and corporate contributions," Marshall says.

The covenant was signed the same year the NAACP Legal Defense and Educational Fund filed an employment discrimination case against Shoney's. The Florida class-action suit charges that Shoney's engaged in discriminatory policies that limited job opportunities for blacks and created "a hostile, racist work environment."

A settlement in the case is still pending. "I cannot comment on the lawsuit," says Marshall, "but there is no connection between the case and the deal with THI."

--Ingrid Sturgis
COPYRIGHT 1992 Earl G. Graves Publishing Co., Inc.
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Copyright 1992, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

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Title Annotation:Thompson Hospitality Inc.
Author:Sturgis, Ingrid
Publication:Black Enterprise
Article Type:Company Profile
Date:Oct 1, 1992
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