News for the Hospitality Executive
|By Caroline Wilbert, The Atlanta Journal-Constitution
Knight Ridder/Tribune Business News
Dec. 15--William B. Johnson's career is one big contradiction.
The Atlanta businessman got rich as a franchisee of Waffle House, the low end of the restaurant industry. He got even richer at the opposite end of the spectrum -- when he bought the Boston Ritz-Carlton in 1983 and built it into a world-famous chain.
Friends, former employees and business associates paint a picture of a reserved, private man but one who demands extraordinary performance from his employees; a man known for his Christian service but also for his temper; a man with a down-home style but who also is a savvy deal-maker.
Even his tastes are contradictory. Johnson pours passion -- and money -- into expensive hobbies, such as Tennessee walking horses, but he doesn't participate in the Atlanta social circuit.
And while Johnson's career has played out in Atlanta, he isn't particularly well-known in the local business community. That's because, by all accounts, he's worked almost as hard at ducking the limelight as at building high-profile companies.
Above all, he's known for the Ritz's success -- though it wasn't a pure success story. The company set a new standard for hotel luxury, but many investors lost money. By the mid-1990s, the Ritz was plagued by lawsuits and unhappy investors. Johnson eventually sold to Marriott.
Now, Johnson is backing plans for another luxury chain. Some past Ritz executives, including well-known former President Horst Schulze, are working from Johnson's Buckhead office, sketching out a strategy. Johnson has said he'll invest.
If the new company gets off the ground, the industry will be watching Johnson to see what's next for the man who already changed the luxury hotel business once.
Johnson, who goes by Bill, characteristically declined to be interviewed for this story. A public relations consultant answered a few questions via fax but didn't respond to inquiries about Johnson's management style or business decisions.
Johnson graduated from Decatur High School in 1955. His yearbook picture shows a still-childish face and a list of activities that included two years of B-team football. He earned a degree in industrial management from Georgia Tech.
He and his wife, Sandra, an Atlanta native and graduate of Agnes Scott, married young. They do not have children.
After graduation, Johnson was a management trainee at a local bank, then worked in the real estate investment arm of an insurance company before opening his first Waffle House in 1966.
One of Waffle House's founders, Tom Forkner, watched as Johnson grew his empire to include more than 150 of the all-night diners, more than any other franchisee. Forkner described Johnson as "a man who did all his homework before undertaking a project."
Even as Johnson's business became increasingly prominent, he kept a low profile. Unlike most business people at his level, he did not speak at investment conferences or grant many media interviews. His style doesn't stand out in a crowd; he dresses simply and often looks like he needs a haircut, say people who know him.
Johnson is an elected member of the vestry at Church of The Apostles, an evangelical Christian church in Atlanta, where he oversaw building of the church's new sanctuary. Dana Blackwood, communications director at the church, describes Johnson as reserved.
"He has a quiet strength about him," Blackwood said. "He doesn't play a lot. He works."
Johnson has served as chairman of the board of Berry College, a Christian school in Rome, Ga. There he earned the reputation of humility, said fellow board member Bill Stokely, a Knoxville businessman.
Others, however, said that Johnson's typically quiet manner can be misleading. There are tirades.
"He's very quiet, and he's very explosive," said Dick Stormont, who headed franchising for Marriott in 1980 and now is a hotel developer.
Morris Ewing, another developer who has worked with Johnson, said he had learned a lot from working with Johnson, though he also has glimpsed the temper. Ewing said Johnson has "a strong sense of urgency." When he wants something done, he wants it done immediately, Ewing said.
Johnson already was wealthy when he struck a deal in 1983 to buy the Ritz-Carlton in Boston and the North American naming rights.
Many industry executives thought he was crazy, Stormont said. Luxury and chain still were considered mutually exclusive. Top hotels were like the Waldorf-Astoria in New York.
"It proved to be something that was an act of courage and foresight," Stormont said.
Johnson developed Ritz-Carltons in Buckhead, downtown Atlanta, Laguna Beach, Calif., and Naples, Fla. By 1990, there were 10.
Fred Alias, who worked as Johnson's chief operating officer in the 1970s and early '80s, described the corporate culture as high-pressure.
Johnson and his top lieutenants began many Mondays with a 6:30 a.m. meeting in the conference room. They listened to a tape of "Think and Grow Rich," a motivational book.
Alias said Johnson delegated responsibilities well. When Alias first started, he compiled a lengthy proposal to open a New York office. Johnson scribbled a brief response: "ROR."
Puzzled, Alias went to Johnson's office and asked what the letters meant. Johnson responded: "Rent our rooms." The message was to open an office or do whatever necessary.
"The incentives were there," Alias said. "The flexibility was always there. The tools were there. You just did not make mistakes."
Alias left the company because the hours were long and vacations nonexistent, he said.
"You know how people say they work 18 hours a day, seven days a week?" Alias said. "When we were beginning, we really did work that much. The only way I could tell it was Sunday, the secretaries weren't there."
Alias was part of a steady stream of turnover in the upper ranks. Some were pushed out and others quit, say former employees.
In 1987, the former president of W.B. Johnson Properties, George Brown, filed a lawsuit, accusing Johnson of defrauding Brown out of his equity stake.
According to the suit, Johnson told Brown in 1986 that his lifestyle was inappropriate and he should move into a less luxurious home. The suit from Brown, a partner, was settled out of court. The terms were not disclosed, and Brown has since died.
Other former employees say that working for Johnson was exhilarating, that he was a great teacher.
Cam Cooper, who worked as vice president of sales for Johnson's non-Ritz hotels and later as the Ritz's national sales director, said Johnson set seemingly impossible sales goals, thereby pushing employees to higher performance levels.
"He was demanding," she said. "That is the way he built his empire. From my vantage point, it was a positive kind of demanding."
Johnson's commitment to quality and growth was more than professional. As the Ritz grew, Johnson poured equal passion into a new hobby, Tennessee walking horses.
"In the early '90s, he purchased a horse or two, and the next thing you know, he went on a run and he wanted to own the finest," said David Kranich, advertising director at the Voice of the Tennessee Walking Horse magazine.
During a major walking horse event in the early 1990s, Johnson threw a party called "A Night at the Ritz," Kranich said. Atlanta staffers turned a run-of-the-mill meeting room in Shelbyville, Tenn., into a lavish banquet hall -- with a spread of crab meat, shrimp, prime rib and fine table linens. They even brought in drapes to outfit the windows. The event stood out in the mostly rural world of walking horses.
Johnson, however, didn't spend much time at the party.
"He doesn't do it to draw attention to himself, but people know who is behind it," Kranich said. "He likes people to know his power."
Johnson's breeding farm, called Waterfall, is the nicest in the industry, with a full-time veterinarian and a large staff, Kranich said. Johnson has also established a scholarship program for trainers' children.
Before horses, Johnson put his energy into sailboat racing. After getting interested in the sport, he bought the 73-foot Windward Passage to compete in elite international regattas. He sold his boat in 1984.
In addition to boats and horses, Johnson has also owned several airplanes, an estate in the Bahamas and a vacation home in Naples.
The Ritz continued to expand through the early 1990s. By 1992, there were 20 hotels.
Johnson did not own most of the Ritz hotels. One of his companies, Ritz-Carlton Hotel Co., managed the hotels for other owners. A second company purchased several hotels and functioned as an ownership vehicle.
Some of the hotels, like the one in Buckhead, succeeded. Others struggled to get the high room rates necessary to make the numbers work. After all, no expense was spared in building or running the hotels.
Johnson's management team, headed by Schulze, demanded an expensive training program, which produced polished and friendly employees. There were also Oriental rugs, original paintings, tea-time harpists and flamboyant flower arrangements.
In 1992, the Ritz became the first hotel company to win the prestigious Malcolm Baldrige National Quality Award.
But quality costs. By the mid-1990s, hotels in St. Louis, Kansas City, Phoenix and Pasadena, Calif., had defaulted on loans, according to news reports at the time.
Even the Boston property, which Johnson owned, was put up for public auction in 1998, after Johnson failed to make payments for several years, according to news reports. Johnson had heavily mortgaged the properties. Blackstone Group paid $75 million for the property.
In the mid-1990s, news organizations also were reporting that hotels in places like Philadelphia, Washington and Cleveland were losing money.
As many hotels struggled, Johnson's long-term management contracts became controversial. The Ritz managed hotels in return for a percentage of revenue and other set fees. As a result, even if the hotels weren't turning a profit, they still paid sizable fees to Johnson's management company.
In 1995, Abdul Aziz bin Ibrahim al-Ibrahim, a Saudi sheik who owned several Ritz-Carltons, sued Johnson and the Ritz-Carlton, seeking compensatory damages of at least $200 million, plus punitive damages.
The suit called the Ritz-Carlton "the most arrogant and financially irresponsible hotel company in the world." It accused Johnson of charging excessive management fees and of billing the hotels for corporate expenses such as corporate staff parties, social functions, yacht charters and retreats.
Johnson "is a character," said Bill Brewer, an attorney who represented the sheik. "On one hand, he was a very pious man. He was very high-profile in his beliefs. On the other hand, the allegations we made in the complaints are of egregious breaches of fiduciary duties."
The battle -- which heated up in 1997 when Ritz stripped its name off the hotels in the middle of the night, claiming service wasn't up to standards -- eventually was settled out of court.
Johnson sold a 49 percent stake to Marriott in 1995 for $200 million in cash and assumed debt. Marriott bought the rest in 1998, after the sheik's suit was settled.
After leaving the Ritz headquarters, Johnson moved into an opulent office building on West Paces Ferry that he developed. It is one of the most expensive office buildings per square foot ever developed in Atlanta. Within the elegant surroundings, Johnson's secretary serves coffee in Waffle House mugs.
When asked about this apparent inconsistency and other contradictions in Johnson's career, his spokesman responded with the following statement: "Guests who visit Mr. Johnson and his office are offered and served coffee in Waffle House cups because they are quality cups."
Johnson has continued to work on multiple projects. He transformed his farm in North Georgia into a high-end golf community and developed a condominium in Florida. Johnson still is the largest franchisee of Waffle Houses.
The next step for Johnson could be hotels, again. Schulze is heading research for the new luxury chain and said he'll decide in the spring whether to continue.
Skeptics say funding for such a venture is impossible to find in today's market. Others say that Johnson and Schulze could pull it off.
Ian Lloyd-Jones, senior vice president of marketing for the Ritz in the 1980s and now the CEO of a small hotel company, hopes his former bosses will give it a shot.
"Whatever they do together," Jones said, "it will be done right, and it will be very successful."
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(c) 2002, The Atlanta Journal-Constitution. Distributed by Knight Ridder/Tribune Business News. MAR,