His three-hour orientation sessions became a relic of the past, of the time "before we were big, rich, and successful. I just got too good, and too busy, to do orientation," he says. In fact, he decided to tape an orientation session, to make a film just like the one he had been subjected to when he worked at Bennigan's. On tape, Dunn told new employees one of his favorite stories, the one about the customer who walks into a chain restaurant and finds himself asking questions of a hostess sign because he can't find a human. The moral: "McGuffey's will never be so impersonal as to make people talk to a sign." A film maybe, but never a sign.
Since Dunn wasn't around the restaurants all that much, he didn't notice that employees were leaving in droves. Even the departure of Tom Valdez, the kitchen manager in Asheville, wasn't enough to take the shine off his "glowing ego," as he calls it.
Valdez had worked as Dunn's kitchen manager at TGI Friday's. When the Hendersonville McGuffey's was opening up, Dunn recruited him as kitchen manager. A few months later Valdez marched into Dunn's office and announced that he was heading back to Indianapolis. "There's too much bullshit around here," he blurted out. "You don't care about your people." Dunn was shocked. "As soon as we get this next restaurant opened, we'll make things the way they used to be," he replied. But Valdez wouldn't budge. "Keith," he said bitterly, "you are turning out to be like all the other companies." Dunn shrugged. "We're a big company, and we've got to do big-company things," he replied.
Valdez walked out, slamming the door. Dunn still didn't understand that he had begun imitating the very companies that he had so loathed. He stopped wanting to rebel against them; under the intense pressure of growing a company, he just wanted to "master their tried-and-true methods. I was allowing the company to become like the companies we hated because I thought it was inevitable," he says.
Three months later McGuffey's two top managers announced that they were moving to the West Coast to start their own company. Dunn beamed. "Our employees learn so much," he would boast, "that they are ready to start their own restaurants."
Before they left Dunn sat down with them in the Classroom at Hendersonville. "So," he asked casually, "how do you think we could run the place better?" Three hours later he was still listening. "The McGuffey's we fell in love with just doesn't exist anymore," one of them concluded sadly.
Dunn was outraged. How could his employees be so ungrateful? Couldn't they see how everybody was sharing the success? Who had given them health insurance as soon as the partners could afford it? Who had given them dental insurance this year? And who -- not that anyone would appreciate it -- planned to set up profit sharing next year?
Dunn's defensive attitude simply showed that he couldn't relate to his employees. His own idea of what it meant to show concern for them had shifted, although he wasn't much aware of it. Forget the pats on the back, the personal attention, the we're-all-in-this-together attitude that employees had cherished back in Asheville. Dunn wasn't about to stand in a circle and join hands with them again.
He treated them like nagging children, writing checks to keep them out of his hair. Throw them this benefit or that, but keep them at a distance. He wasn't really interested in what they had to say. "Your ego won't let you listen," he says. "You get to thinking you're so wonderful that you start getting charitable with people."
Employees sensed it. One departing manager zapped Dunn with a remark he couldn't shake. "You think you can buy people off with health insurance and dental insurance," he said. "Well, you can't."
"It was a real shock," says Dunn. Unfortunately, not enough of a shock for him to act in time.
In the summer of 1986 David Lynn decided he had had enough. Believing that Sneakers would be easier to manage, he offered Dunn a deal: I'll give you my 20% stake in McGuffey's if you'll spin off Sneakers to me and assume its $90,000 debt. Dunn agreed.
Dunn had always been president, but now he had more stock than anyone else in management. His stake rose to 30%, Brandson's increased to 13.5%, and Richard Laibson, a new partner, owned 5.5%. The outside investor held onto the rest. Just after Hendersonville opened, Laibson, a CPA and line cook, was brought aboard to take over the books. Laibson warned Dunn that the Sneakers debt, plus the loss of cash flow, could put the company in jeopardy.
By the end of 1986, when the Sneakers spin-off became official, McGuffey's posted a profit of about $75,000 on sales of $4 million. But the situation was deteriorating. Sales at both restaurants were still dwindling. This time, there were no changes in the liquor laws or new restaurants to blame. With employees feeling ignored, resentful, and abandoned, the rest rooms didn't get scrubbed as thoroughly, the food didn't arrive quite as piping hot, the servers didn't smile so often. But the owners, wrapped up in themselves, couldn't see it. They were mystified. "It began to seem like what made our company great had somehow gotten lost," says Brandson.
For Brandson, though, his own fate was about to take precedence over the company's. One afternoon, while riding his motorcycle at 50 miles per hour in the mountains near the South Carolina border, he smashed into a car head-on. He spent 21 days on a respirator and four weeks in intensive care. It would be four months before he could return to work.
Shaken by all the recent defections, Dunn needed a boost of confidence. So he sent out the one-page survey, which asked employees to rate the owners' performance. He was crushed by the results. Out of curiosity, Dunn later turned to an assistant and asked a favor. Can you calculate our turnover rate? Came the reply: 220%, sir.
Dunn was lost. What had happened to his original concern for employees? "When you become a president of a company, you grow," says Dunn. "The reason you are not a typical employee is because you have a certain ambition, a drive. And what affects you and motivates you every day is different from what affects and motivates them. They hate that the dishwasher leaks or that they run out of plates.
