Originally posted by fbradjr
Sambo’s Why did they close?
Well it did not close because of its name or anything about being Politically correct.<snip>
fbrad jr stated it well.
I was a 'fraction of the action' manager during the seventies. My restaurant was in Rapid City SD ...
Quite accurate (below) but the percentage that the Managers bought was 20% for $20,000 and we were able to purchase 5% (mixed)increments of other restaurants each year. Sad part of it was that Founder Sam Battistone's son was at the healm when everything collapsed:
Here is another version: http://www.santabarbara.com/dining/review_read.asp?pk_restaurant=773
Sambo’s is, however, more than a restaurant. It is a real piece of Santa Barbara history. Sambo’s on the Beach is the original and only remaining site of the once great restaurant chain founded in 1957 by Sam Battistone Sr. and Newell Bohnett. From its humble beginnings over forty years ago, locals and tourists have gathered at this breakfast haven to enjoy quality food and a picturesque view.
Chad is Sam Sr.’s grandson. To him his grandfather was both a great entrepreneur. Sam Sr. was certainly a Horatio Alger success story. He was born in Santo Stefano di Sesano, Italy, a village so small it’s not even listed on maps. After WWI, when Sam Sr. was fourteen, the family left behind the poverty of Italy to seek a better life in America. They settled in Bentlyville, Pennsylvania. Sam Sr.’s father toiled in the coal mines. Sam wanted a better life. When the Great Depression came, he hopped on a freight train and arrived on the West Coast stone broke. Sam trudged the streets until he found a job in a Glendale restaurant. He was a salad boy. He later met a waitress, Ione. They married and had three children, Sam D., Roger and Donna. After WWII, Sam Sr. moved the family to Santa Barbara.
For many years Sam owned and operated a small diner called Sammy’s Grill in downtown Santa Barbara. In the late fifties, pancakes were the rage. A low-priced pancake-coffee house offering a good 10-cent cup of coffee with unlimited refills, full breakfast for $1.25 and pancakes only for 40 cents seemed a good bet for attracting blue-collar families. Sam teamed up with Bohnett, an equipment salesman and designer. They combined their respective first and last names and opened the first Sambo’s.
The Sambo’s theme was emphasized with paintings by artists depicting the adventures of Little Black Sambo on the walls. Meant only as a gimmick with no racial overtones, it came back to haunt the chain in the 1970s during the Civil Rights movement. Sam Sr. and Ione were greatly saddened by the racial issues. Sam was a goodhearted man willing to hire anyone who did a good day’s work for a day’s pay. Sambo’s was perhaps the most equal opportunity employer of the time.
That first summer of ‘57, Sam Sr. kept busy cooking at one grill while his 17-year-old son, Sam D., cooked on the other one. Ione served customers. Total volume for the first six months was only about $35,000, not a promising performance. To build business, Sam Sr. and Bohnett handed out wooden nickels good for a free cup of coffee. Customers soon perceived that Sambo’s was a place that cared and offered value. The restaurant finally caught on and became a major social event in itself.
When a second Sambo’s Pancake House opened in Sacramento in 1958, a unique manager incentive program was created. For $10,000, Sambo’s managers could buy a 10% ownership in their restaurants and receive a 10% share of pre-tax profits. Managers could also buy an interest in other restaurants. The plan was soon dubbed “fraction of the action.” Not only did it give the chain an entrepreneurial spirit, it also provided financing for future sites. Unfortunately, it eventually became a major cause of Sambo’s downfall.
In 1959 four more Sambo’s opened. By early 1966 Sambo’s had 45 pancake houses in California, Oregon, Washington, Nevada and Arizona. In 1967, Sam Sr. and Bohnett decided to retire from active management. It seemed only natural that Sam D. take over as president. Only 27 at the time but well schooled in the restaurant business, he had a more aggressive approach to expansion than did his father. In early 1969 Sambo’s had 92 restaurants and 2,500 employees. The chain went public selling 515,000 shares. The move encouraged even more accelerated expansion. Within a few years the chain flourished into 1,114 restaurants across the United States. Under Sam D.’s leadership, Sambo’s also branched out trying all kinds of restaurant concepts including cocktail lounges and Red Top burger shops.
By 1974, Sambo’s had a training center and warehouse in Carpinteria (it also housed their meat production plant and distribution center) and a luxurious corporate office building on Upper State Street. They were one of the largest employers in Santa Barbara County.
As the number of restaurants grew, however, fraction of the action began getting out of hand. Sambo’s paid out as much as 50% of pre-tax profits for shares. The system became so complex that hardly anyone understood it. Many Wall Street analysts viewed the whole thing as a classic pyramid scheme. In 1977, the SEC ruled Sambo’s either change its accounting practices or drop fraction of the action.
Sambo’s executives had to work out a new compensation plan. Within a few months 300 managers departed. It became impossible to adequately staff existing and future restaurants. In 1981 Sambo’s suffered a $30 million net loss during the first nine months of the year and closed 447 of its 1,114 coffee shops. Sambo’s filed a Chapter 11 voluntary bankruptcy petition but was never able to reorganize. In 1984, the remaining Sambo’s were sold.