Word: samboe
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When business gets bad enough, a company will try just about anything. Sambo's, which has 1,117 restaurants in 47 states, is now even trying out a new name (No Place Like Sam's) at more than 100 of its shops in the Northeast in an attempt to reverse a four-year tailspin. The company, whose restaurants serve everything from pancakes to hamburgers 24 hours a day, has also changed ad agencies and revamped its menus...
Things were not always bad at Sambo's, which was a darling of Wall Street investors in the mid-1970s. Between 1967 and 1977, the number of restaurants in the chain jumped from 67 to 869. Income during that period went from about $1 million to $22.8 million. But in the first six months of this year, the company lost $16.7 million...
...keys to Sambo's initial success was a potent profit sharing plan called Fraction of the Action. This allowed a restaurant manager to invest $20,000 to buy 20% ownership of his operation. When the plan was started in 1967, it attracted a small army of businessmen willing to put in long hours in return for the promise of making it big. Recalls John Puccinelli, who was a restaurant manager for three years in Concord, Calif.: "They recruited us by saying that if you'll stay with Sambo's for ten years...
...managers had quit. And then the lawsuits began. Former managers claimed that the Fraction of the Action was actually a pyramid scheme that indirectly paid off top corporate officials with money put in by the restaurant managers. Charles P. Cattin, a former manager in Portland, Ore., sued Sambo's, charging fraud. Last month an Oregon court awarded him $925,000 in damages. The company paid settlements to resolve ten cases last year, and 15 similar ones are pending. Former managers have set up an organization called S.A.P.S. (Sambo's Association for Partnership Survival...
...restaurant chain has also been suffering from a major image problem. Black groups for years were offended by the company name, which brings to mind the children's story Little Black Sambo. For this reason, the city government in Toledo tried unsuccessfully to block the opening of a restaurant there in 1978. The company denies the charge, claiming "Sambo's" is a combination of the names of its two founders, Sam Battistone Sr. and F. Newell Bohnett. The company finally decided to switch rather than continue fighting. If No Place Like Sam's leads to sales increases...