Jerome J. Richardson - Chairman and CEO of Flagstar Corp - Nota Bene

Chief Executive, The, Jan-Feb, 1995 by Scott Norvell

Teenagers working the morning shift at the Hardee's restaurant on Kennedy Street in Spartanburg, SC, by now are used to the sight of pin-striped Jerome J. Richardson, chairman of $2.6 billion Flagstar Corp., laboring along with them among the fast-food restaurant's heat lamps and stainless steel fryers.

Standing well over 6 feet tall, with the broad shoulders and large hands befitting a former NFL wide receiver, Richardson, 58, sometimes crowds the cramped work area behind the counter. But what can the help do? Ultimately, the orange-and-black Hardee's building is his to crowd.

As founder and head of the sixth-largest food-service company in America - with 584 Hardee's restaurants around the country under franchise; as well as 985 Denny's restaurants, 135 El Pollo Loco's, and 211 Quincy's Family Steakhouses under outright ownership - Richardson can make biscuits or bag fries any time he feels like it. And Richardson says he often feels like it.

"I learn something every time I spend time in one of our restaurants," he says. "Our customers give us good advice, and I get to listen to people who have to deal every day with the decisions we make at the home office." After all, he says, "we don't generate any revenue back here."

It is this hands-on approach to business that has earned Richardson a reputation as one of the industry's ablest managers, helping Spartanburg-based Flagstar rack up 27 years of consecutive growth and profit until an ill-timed leveraged buyout in 1989. Experience, Richardson has learned since then, is no match for the fiscal pressure of a $2.4 billion debt. The company has interest and debt expenses totaling $700,000 a day, and, the chairman observes, "that is a difficult way to operate a business."

Flagstar posted a loss of more than $1.7 billion in 1993 on revenues of $3.9 billion, though third-quarter 1994 net income of $23.5 million compares with a year-earlier loss of $22.9 million. To bolster management, Flagstar recently announced the appointment as president and CEO of James B. Adamson, former CEO of Grand Metropolitan PLC.'s Burger King division.

Richardson, who will stay on as Flagstar's chairman, said he was stepping down to spend more time on the Carolina Panthers, the National Football League franchise he owns, which faces its first season of competition in 1995. Adamson was widely credited with turning around the once-troubled Burger King unit in just 18 months at the wheel. "Jim's extensive restauranting experience makes him well-qualified to lead the company into the 21 st century," Richardson says.

Heading into the 1989 LBO, Richardson had reason to be optimistic about the company's prospects. The Fayetteville, NC, native invested a $4,600 NFL championship check he earned in 1959 from the Baltimore Colts in what was then an unknown commodity - a hamburger franchise. Riding the fast-food bandwagon, he and his partner, football chum Charlie Bradshaw, added 220 more restaurants and took the company public on the New York Stock Exchange before selling it to Trans World Corp. for $80 million in 1979.

Despite the turmoil of the next several years, Richardson stayed with the company and developed his reputation as a master of boardroom politics. His self-effacing air and down-home veneer sometimes cause people to underestimate him, says George Rice, president of Tampa-based consulting firm GDR Enterprises, "but he is certainly no fool." Trans World's spin-off of Flagstar in 1987, an LBO with New York-based Conniston Partners, and a recapitalization by Kohlberg, Kravis, Roberts & Co. in 1992 each brought changes at the top that the CEO managed to ride out. Richardson "has a tremendous talent for survival," says Morgan Stanley analyst Derek Jones.

Flagstar has remained in the red ever since the LBO, showing its first quarterly profit earlier last year, and that only after the sale of a food-and-vending division for $384 million. More restructuring is underway: Last year, Richardson announced that some 14 percent of Flagstar's restaurants would be closed or sold, and that an entire layer of regional managers would be eliminated. Analysts interpret the moves as evidence that restaurateurs, instead of financiers, are back in control at the company.

Richardson recently had to contend with two highly publicized lawsuits brought by minority customers of Denny's. The first concerned minority customers in California who alleged they were asked to prepay meals before being served; the second was filed by black FBI agents who claimed they were refused service in Maryland. In response, Flagstar agreed to hire more minority workers, employ more minority contractors, and offer more franchise opportunities to minority investors.

The purchase of the Carolina Panthers, meanwhile, brought Richardson full circle from his younger days. But even in the heady atmosphere of Superbowl weekend last year, he was hard-pressed to forget the business that put him in that posh hotel with the rest of the NFL owners. That morning, before the game, he made time to stop in at the Hardee's down the street.