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For Paula Deen, Management Mess Leads to Career Meltdown


For Paula Deen, Management Mess Leads to Career Meltdown

Photographs by Getty Images (3)

On Jan. 31, 2012, Wesley Woolf, a lawyer in Savannah, Ga., wrote a letter to the attorney for Paula Deen, the city’s best-known restaurateur. In addition to her flagship, the Lady & Sons, Deen and her brother co-owned a sprawling seafood restaurant called Uncle Bubba’s Oyster House. The venue was located on the outskirts of town and on the periphery of Deen’s business empire—which over the last decade and a half has expanded into television, books, kitchenware, home furnishings, and pharmaceuticals. She rarely set foot in Uncle Bubba’s in recent years.

Woolf explained that he was writing on behalf of a client named Lisa Jackson. For five years, Jackson had worked as general manager at Uncle Bubba’s. During that time, she alleged, she had been subjected to a hostile work environment full of sexual impropriety, boorish behavior, and racist remarks. Woolf offered Deen a choice. She could pay Jackson $1.25 million or face a lawsuit. If Deen chose not to settle, Woolf explained, he would seek maximum news coverage. “Exposure of the racist and sexist culture of her corporate and personal life is going to permanently, and irreparably, damage the value of her brand,” Woolf wrote.

Seventeen months later, a media maelstrom touched off by revelations from the lawsuit has battered Deen’s company. A pack of business partners, including the Food Network (SNI), Wal-Mart Stores (WMT), and Target (TGT), have cut ties with Deen. It’s difficult to know how much money she stands to lose, since her business interests are vast and wide-ranging, but there’s little chance she’ll recover the stature that made her one of America’s most improbable entertainment moguls. “Before you couldn’t rebound from a sex scandal; now you can. But scandals involving animals, children, and race are career killers,” says David Johnson, chief executive officer of Atlanta-area public-relations firm Strategic Vision.

It’s tempting to view Deen’s downfall as a Southern morality tale, a 21st century echo of William Faulkner’s famous line that “the past is never dead. It’s not even past.” The swiftness with which Deen was abandoned by her corporate partners is a reminder of the sensitivities that continue to surround issues of race and class. Yet her story is only partly a cultural one. A look at the rise and fall of Paula Deen Enterprises demonstrates the particular perils of building a business empire based on the distillation and heavy promotion of one person’s life story. Over the years, Deen lent her name, aura, and visage to an unwieldy menagerie of products, services, and people—including her own brother—over which she exerted little control. Once the foundation of her reputation came under scrutiny, the edifice crumbled.
 
 
Deen, 66, built her multimillion-dollar company from a scant $200 that her soon-to-be ex-husband gave her in 1989. In the early years, she made sandwiches in her kitchen at home and had her two sons deliver them to people in places such as beauty shops and law firms. The company grew from there, and so did the number of family members on its payroll.

Deen’s profile began to rise in the mid-1990s, at the dawn of the celebrity chef era. In 1997, an editor from Random House was in Savannah because Clint Eastwood was there, filming a movie version of the best-selling book Midnight in the Garden of Good and Evil. During a rainstorm, the editor popped into the Lady & Sons and was charmed. Random House bought and published Deen’s first professionally produced cookbook. The cookbook sold well, and she was soon promoting its recipes in TV appearances ranging from Good Morning America to QVC (LINTA). Deen’s personality played well on TV. She was Southern and folksy and just a little bit crass.

In 1999, a former Victoria’s Secret model who’d moved to Savannah to start a dog accessories business introduced Deen to a TV celebrity and producer named Gordon Elliott. The two hit it off, and Elliott set out to craft Deen’s personality into a format that would appeal to a mass audience. The first pilot Elliott put together went nowhere. But in the fall of 2001, Elliott and Deen’s agent, Barry Weiner, saw an opportunity in the wake of the Sept. 11 terrorist attacks. They went to the Food Network and pitched Deen’s cooking as the epitome of comfort.

“Barry and Gordon went back to Food Network, and they said, ‘Listen, this country’s scared. We are all scared. We need comfort in our lives,’ ” Deen later wrote in her autobiography, which was published by Simon & Schuster (CBS) in 2007. “We never made another pilot. I got my show.”

Deen was the perfect person to make American viewers feel good about their bottomless appetites for sugary, fatty, deep-fried food. Audiences loved her. “She plays this charming, sticky sweet, and sassy Southern cook serving up food with a lot of butter, and a lot of flavor, that was just absolutely decadent to the core,” says Laura Ries, co-founder of Atlanta consulting firm Ries & Ries. “She was the queen of the South.”

Paula’s Home Cooking did well, and in the following years its success spawned several more series on the Food Network, including Paula’s Party and Paula’s Best Dishes. As her TV stardom grew, Deen evolved from a successful if unpretentious Southern cook into a highly marketable symbol of down-home Southern hospitality. Businesses all over the world began stamping their products with Deen’s name and image.

Once a straightforward restaurant business, Paula Deen Enterprises became an abstraction. Deen was the Donald Trump of the American food market. Like Trump, her name began hanging on brick-and-mortar businesses that she neither owned nor managed. Caesars Entertainment (CZR) opened a line of Paula Deen restaurants in its casinos. Like Trump, she formed a partnership with a publisher to put out a magazine dedicated to her style and business acumen. She offered fans the chance to go on Paula Deen cruise vacations. Trump had a TV show and a catchphrase, “You’re fired!” Deen had a TV show and a catchphrase, “Hey, y’all!”

At a range of big box stores and specialty outlets, Americans could buy a diverse array of Paula Deen-branded paraphernalia, including key chains, spatulas, lobster pots, muffin toasters, chopping blocks, pig-shape cutting boards, entertainment consoles, scented candles, chicken parts, smoked hams, and salad-dressing mixers. Her name was shorthand not just for Southern comfort but for comfort in general. Serta began marketing a Paula Deen line of mattresses. A 30-second TV spot for the Mattress & Appliance Center in Thornton, Colo., featured Deen in a studio kitchen, greeting a chipper woman who’s just rolled out of bed. “It looks like somebody’s gotten a good night sleep!” says Deen. Viewers were told that if they hustled in and bought a Paula Deen-branded mattress, they would also get a free Paula Deen-branded teapot.

Nobody seemed to question the staying power of a cook from Georgia pitching mattresses to suburbanites in Colorado. For years, the reach of Paula Deen products seemed to know few limits—until that day in January 2012 when attorney Woolf’s letter arrived.
 
 
Over the years, Deen grew accustomed to looking after her younger brother, Bubba Hiers, 59. Their father had died while Hiers was still in high school, and Deen and her then husband took in Bubba and their ailing mother. “He was 16 at the time, and no one was taking care of him—such a young boy and just eaten up by all the pain and fear around him,” Deen wrote in her memoir. “He wouldn’t talk about anything to anyone, just ran wild.”

In late 1999, Hiers was in limbo. His wife had left him, and he was wondering what to do next. Deen offered him a job. He moved to Savannah from Albany, Ga., and began working for his sister. In 2004, Deen and Hiers opened Uncle Bubba’s Oyster House. According to court documents in the Jackson case, Deen, who owned 51 percent of the restaurant, more or less stayed clear of its day-to-day operations. Hiers came to work there most days.

Two top managers and an outside human resources firm all recommended that Hiers be removed from such involvement, according to court documents from the lawsuit. Even so, Deen never forced him out. She stood by him defiantly. “Paula’s the alpha and the omega, the beginning and the end,” Hiers is quoted as saying in his sister’s memoir. “There ain’t nothing ever going to separate us but death.”

When Woolf and his client, Jackson, confronted Deen about the working conditions at Uncle Bubba’s, her image had already taken a hit. In 2012 she revealed she had type 2 diabetes, a condition linked to the kind of food that her business dished out and promoted. Worse, she had kept her diagnosis to herself for three years, continuing to promote her signature sweet and fatty dishes until the moment when she signed on to promote a diabetes drug from Novo Nordisk (NVO). All of which looked to some as uncomfortably self-serving.

In his letter to Deen’s attorney, Woolf pointed out the “diabetes debacle” had already cost her fans. Still, in the face of his threat to disclose even more damaging allegations in a lawsuit, Deen refused to settle. The case proceeded to court. At first, the suit got little notice. Scant news coverage followed its filing on March 5, 2012. Deen continued to pack crowds into her restaurants, sell cookbooks, and appear on TV. Then last month, the situation finally exploded. On June 19, the National Enquirer reported that in a videotaped deposition, Deen had admitted to having used a racial epithet—the n-word—in the distant past. She noted that “things have changed since the ’60s,” and it was “not a word that we use as time goes on.” If the word has passed her lips more recently, she testified, it would have been in repeating “a conversation between blacks.”

Soon, myriad reporters were combing through the lawsuit, which is rife with accusations of sexist, racist, and generally loutish conduct at Uncle Bubba’s. Almost all of the accusations therein are directed at Hiers. Jackson claimed she’d never witnessed Deen using racially offensive language or discriminating by gender or skin color except for an incident in 2007 when Deen and Jackson were planning Hiers’s wedding. The complaint filed by Woolf states that “Asked by Ms. Jackson what type of uniform she preferred servers to wear, Paula Deen stated, ‘Well, what I would really like is a bunch of little n-‍-‍-‍-‍-‍- to wear long-sleeve shirts, black shorts and black bow ties, you know in the Shirley Temple days, they used to tap dance around.’ ” In her later deposition under oath, Jackson repeated the anecdote but not Deen’s use of the epithet.

Deen, in her deposition, denied using the n-word but acknowledged that she wanted to have a “Southern style plantation wedding” from the Civil War era using a waitstaff of black men dressed in white dinner jackets, as she had seen elsewhere. Asked by one of Jackson’s lawyers whether she’s aware that those men would have been slaves in the Old South, she said she knew that, “but I did not mean anything derogatory.”

According to the lawsuit, Uncle Bubba’s was losing money until Jackson took over managing the restaurant in 2005. Within six months, she claims, the restaurant started to show a profit. For her money-saving abilities, according to Jackson, Hiers called her “my little Jew girl.” Jackson, who is white and Buddhist, says she spent much of her time trying to save the restaurant and its staff from Hiers and his bullying. She alleges that he began every workday at 10 a.m. by pouring himself a Styrofoam cup of whiskey. According to Jackson, he would then begin viewing pornography on restaurant computers, sometimes instructing Jackson to take a look and leaving a kitchen computer screen open to raunchy sites.

Hiers denied these allegations but in a deposition admitted to boorish behavior. According to the plaintiffs’ lawyer’s account of the deposition, Deen’s brother also admitted to invoking the n-word at work, including in reference to President Obama. While he denied alcohol addiction, he confirmed he had been in rehab for cocaine and alcohol abuse in the past and that he drinks at work. He testified that at home he consumes a gallon and a half of Jack Daniel’s each month. He also confirmed that he’d taken money from the restaurant—some $30,000—that Jackson later discovered and reported to the corporate accountant. Hiers’s and Deen’s lawyers didn’t respond to phone calls seeking comment. Hiers and Deen have denied all liability.

Jackson said she had no problem with Deen until shortly before resigning in 2010. Her gripe is that Deen didn’t intervene to keep Hiers from harassing his own employees. By not acting, the complaint alleges, Deen “ratified” and “actively enabled” her brother’s obnoxious conduct.

Paula Deen Enterprises is a private company, and figuring out precise figures for its three main streams of revenue (restaurants, media properties, and licensing deals) can be tricky—even for Deen. In a deposition, Deen said she “wouldn’t have a clue” how much her company netted last year. Asked if the company “brought in millions of dollars a year,” she replied, “I would say that’s fair.”

Deen indicated that the restaurants didn’t bring in the serious profits. In the deposition, she said she takes no money from the Lady & Sons so she can pay her employees “very, very, very well.” Asked whether she’d be surprised to learn that Uncle Bubba’s owes Paula Deen Enterprises $300,000, she said she wouldn’t be.

What’s indisputable is that the scandal has cost Deen far more than the $1.25 million she refused to pay Jackson last year. In the aftermath of the revelations, Deen’s business empire has collapsed. On June 21, Food Network executives said in a statement that they would not be renewing Deen’s contract when it expired at the end of the month.

The loss of the TV platform is a major blow, says Robert Thompson, the director of the Bleier Center for Television and Popular Culture at Syracuse University. “Each one of those shows, every single time they played, were essentially advertisements for the Paula Deen character and the Paula Deen brand,” he says. “That kind of presence is a very, very valuable thing to someone who is trying to maintain an integrated empire with tentacles all over the place. An octopus has tentacles, but they all connect someplace. The Food Network became the center of it all.”

The Food Network’s decision has made it easier for other businesses to do likewise. Smithfield Foods (SFD), Novo Nordisk, QVC, Walgreen (WAG), Target, Sears (SHLD), and Home Depot (HD) have all announced that they were either suspending their ties to Deen or cutting them altogether. Random House has canceled its contract to publish five more cookbooks by Deen. Caesars will rebrand all of its Paula Deen-themed restaurants.

Deen apologized on two YouTube videos and teared up during an emotional appearance on NBC’s Today. “One of the tenets of crisis management is that if it doesn’t end well, end it quickly,” says Michael Robinson, executive vice president at Levick, a crisis management firm in Washington, D.C. “In 2013 big consumer-facing companies are risk-averse. There are so many voices now they have to pay attention to. Every minute they spend talking about something that isn’t designed to drive people to the store is an opportunity lost for them.”

If Deen has any hope of outlasting the scandal, the key may be to return to her professional strength: cooking. Allen Adamson, managing director of the New York office of brand consultant Landor Associates, says brands that have expanded far and wide from their original base often eventually go through a correction. “This is not the end of Paula Deen,” he says. “She’s going to return to a powerful, regional brand. She’s not going to be as effective anymore as a celebrity spokesperson on the coasts or in other markets. But among her core constituents she might even be more powerful when this is all over. There’s a circle-the-wagons mentality.”

At lunchtime on Saturday, June 30, customers at the Paula Deen Store in Savannah peruse cookbooks, utensils, and dishes labeled “Butter Y’all.” Others wait for tables at the Lady & Sons next door. A customer poses with a life-size photo cutout of Deen. Overhead, a flat-screen TV shows a Deen video from Food Network.

Charles Maxwell, the only black person in the store, walks out of the gift shop holding a bag full of goodies. Maxwell, who owns a charter bus company in Kingsport, Tenn., is accompanying a group of his passengers to the Lady & Sons. He says he’s not abandoning Deen. If anything, he’s troubled by the corporations who are. “I really don’t think it’s right. It’s a shame,” he says. “Everybody says things they shouldn’t have, years ago. It doesn’t bother me. The food’s still good.”

Woolner is a former Bloomberg columnist and reporter, now a freelance writer in Savannah. She can be reached at awoolner@mindspring.com.
Gillette_190
Gillette is a staff writer for Bloomberg Businessweek in New York.

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