The following is an abridged excerpt from Fortunes, Fiddles, and Fried Chicken: A Nashville Business History, which was just published by Providence House Press.
1968 was a milestone year for Nashville business. Hospital Corporation of America was formed. Genesco peaked at 65,000 employees. The National Life & Accident Insurance Co. and Third National Bank formed NLTthen the South’s largest financial institution. The Country Music Association awards were televised for the first time. However, for many Nashville residents, the most remarkable company in 1968 was Minnie Pearl’s Fried Chicken. And to understand Minnie Pearl’s, you have to know a bit about Kentucky Fried Chicken.
In the 1930s, an eccentric man named “Colonel” Harlan Sanders began selling fried chicken out of the back of his gas station in Corbin, Ky. Two decades later, he began to franchise his secret chicken recipe of 11 herbs and spices. By 1963, the Colonel’s chicken was being sold at over 500 locations, most of which were sit-down restaurants that featured it on the menu.
However, Sanders didn’t do too much to standardize his operation, advertise it, expand it, or squeeze profits out of it. In 1963, a Nashville businessman named Jack Massey and a Louisville lawyer named John Y. Brown Jr. talked Sanders into selling them his business for $2 million. Massey and Brown moved Kentucky Fried Chicken’s headquarters to Nashville. And after spending a few months studying the business, they began standardizing KFC locations, adding new franchises, and spending a lot of money on advertising.
At first, the new owners of the company didn’t get along with franchisees that had grown used to the Colonel. But those restaurant owners who stayed with the company, signed new contracts, built new outlets, and acquired stock options eventually would have cause to be very happy about the new program.
In 1966 and 1967, KFC opened about 300 new outlets. In 1968, it opened about 600. Its earnings$800,000 in 1965grew to $12.1 million four years later. Massey and Brownneither of whom had ever taken a business course in their liveshad revolutionized the restaurant business. By that time, some of KFC’s franchisees had become millionaires. One was Dave Thomas, who would later go on to start a hamburger chain called Wendy’s.
KFC had many imitators. One of them was Minnie Pearl’sthe brainchild of John Jay Hooker Jr., a colorful, energetic, and well-connected Nashville attorney who narrowly lost the Democratic nomination for governor in 1966. As KFC grew and its franchisees and shareholders became wealthy, Hooker and his younger brother and law partner, Henry, became convinced that there was room for a second fried chicken chain. According to several people with whom they discussed the idea, they built their case on two arguments. One was that the success of KFC paved the way for such a business, much like Coke had paved the way for Pepsi. The other was that there were many medium-sized markets into which KFC had not yet moved.
There was, however, one important difference between Minnie Pearl’s Fried Chicken and Kentucky Fried Chicken. KFC had started small and grew under the watchful eye of Harlan Sanders, who spent years perfecting his recipe and cultivating his market. The Hooker brothers, on the other hand, had not run a single restaurant before.
Nevertheless, John Jay and Henry Hooker were thinking big. And both acknowledged that they were inspired by Rogers Caldwell, who 40 years earlier had put together his financial empire in the same building that in the mid-1960s housed the law office of Hooker & Hooker. “I hope you make as much money as I did in this building,” Caldwell told the Hooker brothers in the early 1960s. “But I hope you keep more of it than I did.”
In early 1967, the Hooker brothers sold stock in the new venture to their friends, relatives, and political supporterssome got in for 50 cents a share, others $1 per share. Among them were U.S. Rep. Richard H. Fulton, former Tennessee Secretary of State Eddie Friar, Tennessean publisher Amon Carter Evans, Tennessean editor John Seigenthaler, Banner publisher Jimmy Stahlman, former state legislator (and later federal judge) Tommy Wiseman Jr., attorney Jim Neal, Democratic activist (and later Davidson County sheriff) Fate Thomas, former University of Tennessee football coach Doug Dickey, and Ingram Corp. president Bronson Ingram.
Some early stockholders, such as Fulton, Seigenthaler, and Ingram, would later claim they were reluctant to buy the stock at first and did so only after some arm-twisting by John Jay Hooker. “In Bronson’s mind, it was money he had kissed goodbye forever,” Martha Ingram said. But according to Jimmy Bradford Jr. of J.C. Bradford & Co., many people were begging John Jay to let them have a shot at it. “People just went hog-wild,” said Bradford, who said he never bought any of the stock. “I remember going to a cocktail party where John Jay walked in and there were about 10 people wanting to grab him because they wanted to get in.”
Hooker’s idea caught fire, thanks to his personal magnetism and the free publicity from Nashville’s newspapers. On Sunday, June 18, 1967, The Tennessean ran a front-page story announcing the “establishment” of Minnie Pearl’s Fried Chicken. In the story, John Jay Hooker predicted that the firmwhich had not yet sold a single drumstickwould have 500 stores by the end of 1970. “It’s going to be fun for me,” Sarah Cannon (a.k.a. Minnie Pearl) was quoted as saying.
Nashville architect Earl Swensson came up with a design for the Minnie Pearl’s restaurants based loosely on the colors of Minnie Pearl’s hat. In August, the company announced it had sold its first block of franchises to a group of Knoxville businessmen that included former University of Tennessee football coach Doug Dickey. On Oct. 14, The Tennessean reported that the company had sold a block of 30 franchises “representing an eventual investment of $4 million” to a group of Shelbyville investors. Three days later, Minnie Pearl’s was back on the front page, this time for having sold a block of 10 franchises in Atlanta. The company made the front page again on Dec. 31, when it sold 30 franchises in Florida and 30 in California. By this time, the company had opened its first restaurant, a stand-alone building in front of its headquarters at 2708 Franklin Road.
The cost of franchises and the company’s method of reporting franchise fees in its income statement would eventually come under fire from the Securities and Exchange Commission. During Minnie Pearl’s first few months of existence, the company sold a single franchise (or the exclusive right to operate a Minnie Pearl’s restaurant in a particular region) for $20,000. The company preferred to sell a group of franchises rather than a single franchise in order to raise more money. Franchisees paid 10 percent of this amount up front and agreed to pay the other 90 percent later. But Minnie Pearl’s Chicken Systems Inc. reported the entire $20,000 as earnings at the time of the agreement. Not only was this accounting method unusual (Kentucky Fried Chicken did not report franchise fees in this manner), it also burdened Minnie Pearl’s with high earnings that it could never repeat. But company officials, including Henry Hooker, would later defend this practice, claiming that the company’s accounting firm instructed them to do it this way.
By February 1968, Minnie Pearl’s had sold the rights to almost 300 franchised stores, only five of which were in operation. It was then that the company announced its intention to go public.
On May 2, 1968, the day of its initial public offering, Minnie Pearl’s stock rose from $20 to $40.50 a share. The Hooker brothers had pulled it off, turning an idea into a company worth $64 million.
During the summer that followed, many Nashville residents started their day by checking the Minnie Pearl’s stock price and shaking their heads in amazement. Only a few weeks after the IPOapparently confident it had perfected one concept and was ready to move onto anotherMinnie Pearl’s announced it was starting a second chain named after black gospel singer Mahalia Jackson. Before news of Mahalia Jackson’s had sunk in, the company announced it was starting a third chain called Minnie Pearl’s Roast Beef.
On Aug. 3, 1968, the grand opening of Minnie Pearl’s five Nashville outlets made The Tennessean’s front page. The next day, the morning paper gave front-page coverage to yet another speculative venture by the companythe development of a chain of dry cleaning establishments. A week later, Minnie Pearl’s announced it had earned $2.6 million on revenues of $6.2 million for the first six months of the year. Boosted by this news, the stock climbed to $56 a share. By Sept., the company had sold the rights to 800 restaurants, fewer than 400 of which had actually opened.
In October 1968, Fortune magazine ran an article that sounded a skeptical note for the long-term success of Minnie Pearl’s. “If the food does not agree with the people who are supposed to patronize all these outlets, then Minnie Pearl’s will find itself with a balance sheet full of deserted buildings,” the story said. The Nashville media would have no such skepticism for another year.
At this point, the Hooker brothers hired longtime friend and Commerce Union Bank executive Edward G. Nelson to be president of the company. Years later, Nelson said he became concerned almost immediately about the direction that the business was headed. Nelson knew they could sell franchises for only so long. Eventually, the focus had to be changed from selling franchises to approving sites, opening stores, and selling chicken. Minnie Pearl’s simply did not have the organization or the money to do this. “Being president of the company was like being shackled to the train tracks when you know there is a train coming right at you,” Nelson said.
By the end of 1968, Minnie Pearl’s still had fewer than 40 restaurants open, almost none of which was making a profit. It also had more than 100 under construction and another 300 in some stage of development. With all the construction plans, real estate acquisitions, equipment distribution, and franchise sales going on, Nelson said there was almost no way to actually figure out how much money was being spent. “It was like watching the Seabees build a new airbase in the Pacific,” Nelson said.
A magnificent salesman with little interest in details, John Jay Hooker told Nelson to deal with the nuts and bolts of running the company while he spent all his time and energy coming up with new franchises to sell. In January 1969, Minnie Pearl’s Chicken Systems Inc. changed its name to Performance Systems Inc. (PSI) in order to emphasize the idea that it planned to sell more than just chicken. Before long, the company announced it was branching off into three new concepts: a day-care chain, an automotive repair chain, and a chain of ice cream stands. Meanwhile, the company’s stock price was still so strong that the firm made its first acquisition: a 180-unit hamburger chain based in Florida called Royal Castle.
As PSI announcedand the daily newspapers reportedthese grandiose plans, it occurred to the Hooker brothers that there was one very obvious group of people to whom they could sell franchises. By this time, the 2-year-old company had made many of the Hookers’ friends rich. As many of them sold stock at an enormous gain, the Hookers convinced some of them to reinvest at least some of those gains in roast beef franchises. Shareholder and Congressman Richard H. Fulton became a franchisee in California and Florida. Shareholder Tommy Wiseman Jr. became a franchisee in Michigan and in California.
However, not everyone who sold stock bought franchises. Bronson Ingram bought 4,000 shares of stock for 50 cents a share, sold it after it went public, and built a swimming pool with the proceeds. “We called it the Minnie Pearl’s Fried Chicken swimming pool,” Martha Ingram said.
Thanks in part to this second wave of franchise sales, PSI continued to have a decent cash flow for the next several months. By March 1969, PSI had sold 1,400 franchises, the sale of which managed to offset the high cost of opening over 200 chicken restaurants.
By this time, Minnie Pearl’s had made it look so easy that it had created its own wave of copycats. Among the franchising companies founded in Nashville in 1968 and 1969: Tex Ritter’s Chuckwagon, Hank Williams Jr. Barbecue Pits, Al Hirt’s Sandwich Salons, Tennessee Ernie’s Foods, and Eddy Arnold’s Tennessee Fried Chicken. “I sure would hate to be a chicken in Middle Tennessee,” Eddy Arnold’s president Dick Hall said.
The first hint that something was wrong came when Minnie Pearl’s restaurants began to open and customers began to taste the food. Its meteoric rise notwithstanding, almost no one at Performance Systems actually knew anything about cooking chicken. This was not a secret; the Hooker brothers admitted to prospective investors that they knew nothing about cooking. But they always downplayed that problem. “One time I told Henry Hooker that no one at the company knows a damn thing about cooking chicken,” J.C. (Jimmy) Bradford Jr. said. “And Henry said to me, ‘You’re damn right. But the easiest thing to do is fix the chicken. We can just call up General Mills or any restaurant we want and they’ll get us someone who knows that any time we want.’ After the restaurants opened, everyone would go try the chicken and they wouldn’t go back after that.”
Richard L. Fulton, the son of then-Congressman Fulton, got a job working at the Minnie Pearl’s real estate department in 1968. The younger Fulton said the company was building new restaurants so fast that there was no way that the food could possibly have tasted the same. “No two Minnie Pearl’s restaurants ever served the same chicken,” said Fulton. “The company put out a recipe book that told all the cooks how to make chicken, gravy, rolls, and everything, but no one followed it because many of the managers were retired cooks from the military and each wanted to use their own recipe.”
Performance Systems had several other problems that had begun to affect its stock price. Convinced that he could leave the details of actually operating a chain of fried chicken restaurants to others, John Jay Hooker had moved on to roast beef, day-care centers, and transmission repair by the middle of 1968. As hundreds of franchisees borrowed money and built stores, they found it cost money. As they opened stores, few made a profit, which made the idea of building more stores problematicif not impossible.
Meanwhile, the home office in Nashville was doing little to help them in the way of providing technical expertise and assistance. The big national advertising program promised by the company never materialized. By late summer 1969, banks and investors began to realize that PSI was in real trouble, and the company’s stock sank from $40 to about $10.
John Jay Hooker’s political ambitions also distracted the company’s attention from the chicken business. From the beginning, Minnie Pearl’s ownership and management had been dominated by the Hooker brothers and their political allies. By the summer of 1969 these workers were spending more time on John Jay’s next gubernatorial campaign than helping PSI’s franchisees.
Nevertheless, Nashville’s local newspapers did not act as if anything were amiss, at least not yet. On Aug. 21, when John Jay Hooker resigned his job with PSI, The Tennessean made it sound as if Hooker had built a solid company. “His very entry into the Minnie Pearl’s Chicken System...was in large measure to answer the political criticism that he had no business experience. Well, he has it now.”
However, if reporters had dug they would have found a lot of interesting stories. The once high-flying firm had stopped selling franchises. Newly opened Minnie Pearl’s chicken and roast beef restaurants were losing money fast. Some were closing within months of opening. Banks, concerned about Minnie Pearl’s cash flow situation, were no longer lending money to its franchisees.
Perhaps the most potentially damaging story concerned a related company called Whale Inc. The Hooker brothers started Whale in 1967 in an attempt to form a “conglomerate” of sorts that might diversify their holdings. After buying a couple of small unrelated companies, Whale bought a group of California Minnie Pearl’s franchises with money that the Hookers’ had made from PSI stock sales. After going public, Whale’s stock shot from $2 to over $50 dollars a share, making it possible for the company to make several other purchases.
In April 1968, Whale bought Temcoa space heater, stove part, and explosive shell manufacturer on Charlotte Pikefor $4 million in Whale stock. The Hooker brothers later used Temco’s assets as leverage to buy other Nashville companies. One was the Nashville Bridge Co., which Whale bought from Harry Dyer in November 1968 for $15 million in cash. Others included a machine shop called Dolphin Tool, a steel fabricator called Cole Steel, a yearbook printer called Benson Printing, andin a deal that was signed but never transacteda century-old brick manufacturer and building supply wholesaler called T.L. Herbert & Sons.
Years later, many Nashville residents remembered Minnie Pearl’s, but few knew anything about Whale. One reason for this disparity is that in 1967 and 1968, while Whale was purchasing assets such as Temco and the Nashville Bridge Co., neither the Banner nor The Tennessean reported that John Jay and Henry Hooker had anything to do with it. Henry Hooker founded Whale and served as its first president. But the only official at Whale who was ever mentioned in the newspapers before 1970 was its president Albert Hill.
After a couple of years of acquiring assets at a remarkable rate, Whale began to have serious financial problems. For several months, John Jay and Henry Hooker managed to keep the company afloat by moving assets from one part of the company to another. But by the summer of 1969, Whale’s stock was sliding fast.
In the fall of 1969, there were more hints that the Hookers’ empire was about to come unglued. Ed Nelson resigned and went back to Commerce Union. Nashville advertising and public relations firm Noble-Dury announced it was dropping the PSI account.
On November 5, PSI made a grave announcement that, unlike most of its other press releases, did not make the front page of either Nashville daily newspaper. The company announced that its retail units had experienced an “unexpected decline” in sales that had caused the company to show “a substantial loss” for the first six months of 1969. Neither paper followed up with more detail.
The revelations about Performance Systems Inc. that surfaced in 1970 are too numerous to detail. But in general, the company had lost enormous amounts of money in its attempt to build a chain of fried chicken outlets overnight. Meanwhile, several divisions of Whalesome of which had long histories of making moneywere now losing it.
In February, PSI stated it had lost $5.5 million during the first half of 1969. About that time, PSI came under investigation by the Securities and Exchange Commission (SEC) for its accounting practices. By March, the Nashville business had become so infamous that a Fortune article said “the classic example of what can happen to an unsophisticated entrepreneur is provided by the trials and tribulations of Performance Systems Inc., once known as Minnie Pearl’s Chicken Systems Inc.”
By late summer, over half of the 250 stores the company had managed to open were closed. The corporate office, which only a year earlier had been coming out with new ventures almost every week, was now in over its head trying to help franchisees get out of leases.
As revelations about PSI went from bad to worse, the Banner began to change its tone. After all, this was no longer just a business story. The PSI debacle centered on Democratic candidate John Jay Hooker Jr. The Republican Banner suddenly couldn’t get enough of it. Front-page press releases about new PSI franchising ideas disappeared, replaced by pieces about Minnie Pearl’s stores that were closing down and Whale subsidiaries that were in financial trouble.
PSI’s 1969 report was supposed to have been filed with the SEC in April 1970. In July, the SEC announced that the company still had not filed the report and had been given even more time. That extension may have helped Hooker win the Democratic nomination for governor on Aug. 5, because when PSI came out with its annual report in September 1970, the numbers were far worse than anyone had imagined. Incredibly, the 3-year-old company had lost almost $31 million in 1969. The annual report also stated that the company’s revenues were insufficient to meet its day-to-day needs and that it no longer had the ability to borrow money. PSI stock, which once sold at $67 a share, fell to 44 cents.
About the same time, Whale declared bankruptcy, turning several Nashville employers over to the hands of a receiver. Some of Whale’s assets, such as Benson Printing, Dolphin Tool, and Cole Steel, were later returned to the entities from which Whale had bought them. Temco, which once had over 700 employees, now had about one-tenth that number. Nashville Bridge Co., which had a 70-year record of building bridges, barges, and buildings all over the South, was taken over by a bank that sold it to the American Ship Building Co. of Ohio.
For the next eight weeks, Republican candidate Winfield Dunn hammered away at Hooker over his business record. Meanwhile, in what became one of the most personal crusades against a candidate by a newspaper in Tennessee history, the Banner ran story after story about the Minnie Pearl’s debacle on the front page. It even made the unprecedented move of running front-page editorials opposing Hooker’s candidacy, citing PSI as evidence of his incompetence. “While Mr. Hooker himself may not care about the misfortunes of those who have become the victims of his get-rich-quick business schemes, 4 million Tennesseansalready struggling to pay their mounting tax billsshould consider the risks of placing him and his associates in charge of the public treasury,” stated one such piece. Meanwhile, Banner cartoonist Jack Knox came up with several memorable depictions of a frazzled Hooker, a chicken and a whale nipping at his heels, being dragged down by his legal and financial debacle.
As the PSI fiasco became national news, however, both Nashville newspapers became part of the story. On Jan. 27, 1970, The New York Times ran a front-page story in which it pointed out that Tennessean editor John Seigenthaler, Tennessean publisher Amon Carter Evans, and Banner publisher Jimmy Stahlman were among the 106 initial investors who got Whale stock for 50 cents a share. Stahlman denied the charge at the top of the front page of his newspaper that day (under the pretext that the stock was in his wife’s name). Eight months later, The Wall Street Journal ran a front-page story about the danger of newspaper executives sitting on corporate boards. One of the examples it cited was Evans and Seigenthaler serving on Minnie Pearl’s board in 1967 and 1968. “As the Hooker fortune fades, critics charge, so did The Tennessean’s coverage of his franchise company,” the story said.
In a 1999 interview, Seigenthaler admitted that his involvement in the Minnie Pearl’s venture was a bad move, even though he made a six-figure profit off his investment. “It was a mistake on my part to join the board,” he said in 1999. Seigenthaler said he resigned from the company’s board of directors as soon as he realized it was going to be heavily covered in the newspaper. Seigenthaler said he never discussed the coverage and play of the Minnie Pearl’s story with then-Tennessean business editor Albert Cason. He said the heavy coverage of Minnie Pearl’s had more to do with Hooker’s political past and future than any grand scheme for profits by shareholding journalists. “It was more than just another company,” Seigenthaler said. “Everyone knew that John Jay had just lost the governor’s race in part because of his lack of business experience.”
As Hooker fought off charges of mismanagement and incompetence, one person who came to his defense was Sam Fleming. “There has been nothing dishonest done,” the Third National Bank president told Business Week. “A lot of people in Nashville made a lot of money. The only people to lose big were the funds.” Fleming was referring to a mutual fund called SMC Investment that bought 305,000 shares of Whale for $27.50 per share in December 1968 and then watched the stock spiral to less than a dollar a share. His defense of Hooker was made all the more remarkable by the fact that the now-bankrupt Whale owed Fleming’s bank $3.7 million.
In November 1970, Winfield Dunn defeated Hooker, becoming Tennessee’s first Republican governor since the 1920s.
It took years to sort out the legal mess left by PSI. After a year and a half, the SEC ruled that the company had filed financial statements that were false, rewriting the company’s 1968 annual report to show that the company lost $1.2 million rather than earned $3.2 million.
That conclusion would eventually prove to be the basis of a class-action lawsuit by PSI’s shareholders, who were able to recover a small part of the money lost through ownership of the company’s stock. By 1974, the stock was going for less than a quarter a share.
In order to meet its debts, PSI had to sell its major assets, most notably the Royal Castle hamburger chain. That process took until 1975, after which the company became inactive for two years. Then, in 1977, the company actually made a comeback under a Nashville attorney named John Chambers, who converted it into a small computer company and changed its name to DSI Corp.
Many Nashville residentsespecially those who invested in itnever forgot the Minnie Pearl’s fiasco. “It is one of those experiences that I have to look back on and laugh, because I screwed it up,” said Thomas Wiseman Jr., who watched his expensive roast beef franchise become worthless. “John Jay was a great idea man. But he did not follow through with a lot of implementation, and that was what happened to the company. The thing could have succeeded.”
For former Congressman Richard H. Fulton, the Minnie Pearl’s experience was one he would just as soon forget. “I never have been one to dwell on the past,” Fulton said in 1998. Although Fulton claimed that the Minnie Pearl’s investment brought him more headaches than profits because he too bought franchises with his capital gain, the experience changed his life in an unforeseen way. Fulton met his second wife Sandra Fordthen John Jay Hooker’s secretaryon one of his trips to the Minnie Pearl’s office.
For Fulton’s son Richard, the experience was one he looked back on with a combination of amusement and cynicism. But years later, the younger Fulton said he probably learned more during his two years at Performance Systems Inc. than he would have learned anywhere else. “It led me to real estate,” said Fulton, who later became chairman of a commercial real estate company called Grubb & Ellis/Centennial.
For Ed Nelson, who went on to be president of Commerce Union Bank, the Minnie Pearl’s experience was a diversion that people never stopped kidding him about. “The day I left, I was extremely relieved and immediately felt that I had the best education of my life,” Nelson said years later. “But I was very lucky to graduate from it.”
For John Seigenthaler, who remained an executive with The Tennessean until 1991, the experience made him realize the danger of stock ownership and board membership. “It was a wonderful lesson and it taught me where I belonged, which was in that newsroom,” he said. “And in the end, it made me a better editor.” Seigenthaler said that at about the same time as the Minnie Pearl’s fiasco, he resigned from the Rotary Club because of its refusal to accept black members. The two experiences kept Seigenthaler from joining boards for the rest of his tenure at The Tennessean.
Like most everyone else who got Minnie Pearl’s Fried Chicken stock before the company went public, Opry star Sarah Cannon made a lot of money from her investment. But Cannon, a Ward-Belmont graduate who managed to walk in both country music and Nashville society circles her whole life, was embarrassed about the failure of the company that carried her stage name. “She was very bothered by all the negativity and the fact that she was attached to something that had a stigma to it like that,” said Tree Publishing executive Buddy Killen, a friend of Cannon’s.
Although John Jay Hooker Jr. ran for public office again, he never came as close to winning an important post as he did in 1970. For the rest of his life, people wondered what might have happened had the Minnie Pearl’s fiasco never happened and had Hooker won the governor’s race in 1970. Some went as far as to speculate that Hookera more inspirational speaker than a Georgia governor named Jimmy Carterwould have been in line to take advantage of the political vacuum that followed the Watergate scandal.
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