As of Oct 18, 2011, PolitiFact[1] had checked out 19 statements by Herman Cain. It judged him telling the truth zero times, “mostly true” 3 times, “half truth” 4 times, “mostly false” 3 times,   “false” 7 times,  and “pants on fire” 2 times.” That’s 16 out of 19 half truths or worse, which means 84% of Cain’s statements have been judged half truths or worse.  Politifacts is obviously willing to call Cain out when he lies.

That is why it is so disappointing in this case, where PolitiFact should have exposed the fact that Cain wasn’t telling the truth when he talked about his success as manager of Godfather’s. If they had dug a little deeper and understood the situation more clearly, that is what I am sure they would have done. It is not a difficult situation to understand. Cain was appointed manager by Pillsbury to their new Godfather’s Pizzas restaurants  in order to increase profits which had fallen from about $16 million in 1984 to virtually zero in 1985. Based on the estimates of the previous owners, they hoped the chain would do $16 million in 1986, rising to $30 million in 1990.  The main question that PolitiFact should have looked at is did Cain meet these marks. If he did, then he mostly told the truth about turning Godfather’s around, if he didn’t, it was not mostly true.

Instead PolitiFact did a puff piece on Cain[2], talking about all sorts of irrelevant things about his manager style. It says, “He emphasized communication, giving speeches at important moments to employees and franchisees. After his first 60 days at Godfather’s, he gave a speech he called “get on the wagon,” which he now uses in political speeches.”

Some managers give speeches, some don’t. Some managers are good speakers, some aren’t. Many managers are excellent managers without giving any speeches. His speaking abilities is irrelevant to the question of whether he turned things around at Godfather’s.

The Polifact article tells us “Cain changed that by uniting the franchisees, overhauling the chain’s advertising, and getting his team focused on its core mission: pizza.

Did Cain unite the franchises? Here is what the previous president of the company said about the franchise situation in a Nation’s Restaurant News article from Dec. 2, 1985, months before Cain took over:

While Godfather’s remains locked in litigation with its largest franchisee, 114-unit Concept Development Inc., most others have responded favorably to a new short-term marketing plan and the promise of vastly increased support services. Nonpayment of royalties has practically ceased, Pettis said, although the company expects to lose some franchisees “who are able to pay but just don’t want to.

“There’s now a sense of cautious optimism within the system,” added Pettis, who reports to Burger King chairman and chief executive Jeff Campbell under Pillsbury’s current restaurant scheme. “It took a lot of work, but most [franchisees] are convinced that things will get better[3].”

The lawsuit with the Concept Development Inc. franchisee was settled before Cain came on board. Thus it was really his predecessor , Pettis, who united the franchisees behind the company.

The PolitiFact article backs up its claim that he overhauled the advertising, but not by giving the facts. It starts giving testimonials for Cain from apparently a list of old friends. It says, “Charles Henderson, who runs coffee kiosks in Pennsylvania, was Cain’s director of marketing back then. He says Cain is “probably the most inspirational person I’ve ever met in my life.” That a man who Cain hired to do marketing speaks highly of his speaking ability is nice, but quite irrelevant to the question at hand. Cain’s speeches might have turned hundreds of employees to Jesus or the Devil, but this has nothing to do with making profits for the stock holders of Pillsbury. That was what Cain was supposed to do.

Some managers start new ad campaigns, some don’t. It is irrelevant if the new ad campaigns don’t increase sales or profits. The article never tells us if the new ads did that. The article tells us how he hired J. Walter Thompson, a new ad agency, but it does not tell us that they split twenty months later “over compensation[4]” In fact, Cain had numerous ad campaigns and four different ad agencies over the first two and a half years at Godfather’s. None of them appears to have helped. The constant changing of ads and companies indicate that Cain himself was dissatisfied with the ad results from Ads that he himself had selected.

The article gives a testimonial from Jeffrey Campbell, the executive at Pillsbury who hired Cain to run Godfather’s. Campbell is certainly a nice man and his praises of Cain may be sincere or it may be due to the fact that Cain’s failure may be seen as his failure. He gambled big time on Cain by putting him in charge of Godfather’s and lost. The article does not mention that Campbell was fired by Pillsbury twenty six months after hiring Cain. Campbell was fired when the restaurants division he was in charge of had suddenly falling profits.  This is from a June 1988, New York Times article[5]:

 J. Jeffrey Campbell resigned yesterday as chairman of the Pillsbury Company’s troubled restaurant group, and Pillsbury said it would appoint a new corporate chief executive by its annual meeting in September.

William H. Spoor temporarily assumed the top corporate post in February.

A Pillsbury spokesman said Mr. Campbell’s departure after 13 months on the job spared Mr. Spoor’s successor from the decision of whether to keep the manager of the restaurant group.

Pillsbury has acknowledged disappointing performance in several food businesses over the last three years, and particularly at Burger King, which has lost market share to its archrival, McDonald’s. Amid these problems, John M. Stafford resigned as Pillsbury’s chairman and chief executive in February. Mr. Spoor, who held the job from 1973 to 1985, returned and and began searching for a replacement.

When Mr. Spoor returned, security analysts speculated that Pillsbury might be acquired or that Burger King might be sold. Some analysts believed Mr. Campbell wanted Mr. Stafford’s job; others believed Mr. Campbell was close to being dismissed because of the restaurant group’s poor results.

Mr. Campbell had supervised the operations of Pillbury’s Burger King, Steak & Ale and Bennigan’s restaurant chains. He was promoted to his recent job from the post of chairman of Burger King.  

Testimonials by the man who hired Cain and the man Cain hired to do ads are certainly not objective facts. If Cain failed as a manager, these men can be seen as partially responsible for that failure. They have subjective reasons for praising Cain.

The article then does something right. It looks at the numbers:

Technomic, a research and consulting firm focused on the restaurant industry, has research data on Godfather’s going back to the 1970s. At PolitiFact’s request, vice president Darren Tristano examined the revenues and franchise numbers for Godfather’s during the time Cain headed it from 1986 to 1995.

It’s not possible to determine profitability from those numbers, but they do show Godfather’s place in the market, particularly in comparison with its competitors.

“It’s really hard from that period to find a strong positive or a strong negative. It’s more like ‘steady the course,’ ” Tristano said.

This shows a serious problem. If an analyst like Tristano was not able to determine profitability from his facts and figures, how were stockholders and others at Pillsbury able to make vital decisions at that time?

Tristano is being truthful, but euphemistic when he says that it is hard to find a strong positive or a strong negative and “It’s more like steady the course.” Godfather’s was basically breaking even when Cain took over in 1986 and it apparently was breaking even when he left in 1995.  In this sense, Tristano was telling the truth when he says that he found a neither strong positive or a strong negative. “It’s more like steady the course.”

However the Politifact writer, taking Cain’s general line as true, misinterprets this and tries to find an excuse for it.

Still, “steady the course” isn’t bad for a company that was troubled to start out with and in an industry that’s punishingly competitive, analysts said.

Godfather’s position was particularly perilous. It wasn’t as big as chains like Pizza Hut and Domino’s, and it also had to compete with locally owned mom-and-pops in just about every market.

Cain did not say “he steadied the course” at Godfather’s Pizza. He said that he turned it around. The demand for restaurant pizza was booming in the late 1980’s and that is why competition increased.

As far as competition is concerned, Godfather’s Pizza had an advantage over Pizza Hut and Domino’s. It had the backing of Pillsbury, a corporation with over 3 billion dollars in assets and the second largest fast food restaurant owner in America when Cain took over.

Cain himself had this to say about the competition, 18 months after taking over Godfather’s, on November 1, 1987, in the Wall Street Journal:

“It is a tough battle that never lets up in this market segment,’ admits Cain. But the greatest strength in the pizza segment right now is that it is still growing strongly. According to Henderson, the segment will grow 10 percent through 1991 with market share reaching 15 percent. “Because of the growth in the segment,’ says Cain, “I believe there is room for all these players, at least for now.’ He adds that the growth also means that Pillsbury would not sell Godfather’s. “The segment is growing quickly, and it is hard to imagine that a growth-oriented company like Pillsbury wouldn’t want to be in it. If they had sold Godfather’s 18 months ago, they would eventually have wanted to buy another pizza chain.’

This was six months before Pillsbury announced it was selling the company. Cain predicted Pillsbury would not sell the company and he claimed the “the segment is growing quickly.” Instead of crying about how tough the pizza business was, as the PolitiFact article claims, Cain was primarily emphasizing how quickly the pizza business was growing.

The PolitiFact article is particularly clueless when it says, “Two years after Cain was named chief executive officer, Pillsbury decided to get out of the pizza business and sell Godfather’s. Cain and his management team decided to buy the chain in a leveraged buyout for an undisclosed sum.”

First, Pillsbury did not decide to get out of the pizza business. It still continued to have its frozen pizza business. Second, the only reason that Pillsbury decided to sell Godfather’s Pizzas was because Cain had failed to deliver on his promise to turn the company around. After waiting two years, they stopped believing Cain’s Mosaic promises of a bright future just around the corner. They put Godfather’s Pizzas up for sale because he was continuing to lose money.

This is from the Wall Street Journal of March 18th 1988.

Pillsbury Co. reported a $107.8 million loss for its third quarter ended Feb. 28, and disclosed it is negotiating to sell its 580 unit Godfather’s Pizza chain.

The earnings report came after a second day of frenzied trading in Pillsbury stock, fueled by speculators and various unconfirmed takeover rumors.

Pillsbury’s loss compares with earnings of $48.5 million, or 56 cents a share, in the year-earlier quarter. Revenue fell 2% in the latest period to $1.50 billion from $1.53 billion. The revenue decline came from Pillsbury’s restaurant business.

The troubled food and restaurant concern had write-offs for restructuring in the quarter of $140.9 million, $50 million more than Minneapolis-based Pillsbury had said it expected to write off earlier this year.

Pillsbury’s decision to sell Godfather’s is the latest move in a series of efforts to improve its restaurant group’s performance. In the latest quarter restaurants were responsible for pretax losses of $113.1 million. Pillsbury’s Steak & Ale and Bennigan’s chains also are considered by some analysts as candidates for the auction block.

While the company didn’t indicate what price it hoped to receive for Godfather’s, Pillsbury paid nearly $400 million for the struggling chain in 1985.

It was only when they were unable to find another buyer for the company that they finally sold it to Cain and his management group.  The purchase prize was not disclosed, but some original estimates of $30 million appear to have been accurate. It is hard to imagine that Cain just decided to buy the company. It is pretty clear that Cain was desperate. He was 42 years old and essentially being fired by Pillsbury. His record would show a major management failure in running Godfather’s. It is hard to see where he could have gotten a job with his eclectic background. He hadn’t worked in computer science for seven years, basically a lifetime in computers. As a manager, he had some success at Burger King for two and a half years, but a major failure at Godfather’s. Fast Food restaurants were in a slump generally and management positions were shrinking. Buying the company in a buy-out was the only option that he really had to keep himself off the unemployment line.

In the two years that Cain managed Godfather’s Pizza for Pillsbury, 1986-1988, sales fell from $275 million to $242.5 million. The number of stores fell from 640 to 563. There is only one quarter during this time that there is any report of profits. On Oct 5, 1987, there is a report in Nation’s Restaurant’s News that Godfather’s “’moved solidly into the black,’ the company said.” There were no report after that of Godfather’s making a profit and Pillsbury put it up for sale five months later.

PolitiFact failed to emphasize these important facts which would indicate how Cain really did in his promise to turn the company around for Pillsbury. Two years before Cain took over, Godfather’s had fallen from third to fourth place in sales for U.S. Pizza Restaurants. Cain promised to bring it back to number three. When Pillsbury sold it to Cain and his management team, it had fallen from fourth to sixth place[iii]. Certainly no turnaround happened in the first two years that Cain took over. By the time he was forced to resign in 1995, Godfather’s had fallen further to eight place[6].

By selling the company to Cain for a fraction of what they had paid for it, Pillsbury was getting rid of both Godfather’s and Cain.

An article published in Bloomberg Businessweek by Tim Jones got the story right. It came out on June 6, 2011[7], the same week that PolitiFact published its article. It noted that he closed 20 percent of the company’s 640 restaurants and fired 300 to 400 people. Jones perceptively wrote,  “He is a politician, just one who hasn’t held office. And like most politicians’ log cabin stories, Cain’s oft-told tale of how he rescued Godfather’s is kind to its hero and notable for what it leaves out.” He notes that Cain “has not released details of the company’s performance under his leadership” and ends by correctly stating:

The bottom line: Though Cain says he would revive the economy as he did Godfather’s Pizza, it’s not clear the chain improved much when he was CEO.

The facts point to the fact that PolitiFact should have reported that Cain’s statement that Godfather’s was going bankrupt and he turned it around was mostly a lie, if not a complete lie.

Please ask reporters to demand that Cain release his profit and loss statements from the years he was managing Godfather’s Pizzas.


[2](viewed Oct. 18, 2011) http://www.politifact.com/truth-o-meter/statements/2011/jun/10/herman-cain/herman-cain-godfathers-pizza-turn-around/

[3] Dec. 2, 1985, Zuckerman, Dave, Nation’s Restaurant News, Godfather’s Licensee’s, Pillsbury Mend Fences.

[4}] August 8, 1988, Nation’s Restaurant News.

[5] 12/22/1987, Dougherty, Philip H., N.Y. Times, Advertising, Thompson Splits with Godfather’s Pizza.

[6] June 23, 1997, Nation’s Restaurant News.

[7] Jones, Tim Bloomberg Businessweek; Chewing Over Herman Cain’s Business Pass, 6/20/2011, Issue 4234, p36-38


Advertisements