Reference no: EM132402402

Shepherd Mountain Hotel

The Rockyhill family has owned the Shepherd Mountain Hotel for over three (3) decades. The Shepherd Mountain Hotel (SMH) is located near the famous Shepherd of the Hills area on a lake in the heart of the Ozarks, located - as mentioned in their website - in the heart of Missouri. The Lake of the Ozarks is the Midwest's premier lake resort destination, offering world-class boating, golfing, shopping and fishiing, and a wide variety of lodging, restaurants, state parks, and other recreational activities. According to the website, Lake of the Ozarks vacations are de ned by the Lake and its many waterfront accommodations, restaurants, recreational and entertainment venues.

For over 30 years, the Rockyhill family has managed The Shepherd Mountain Hotel, employing family members in management positions headed by the patriarch of the family - John Rockyhill Sr. in the hotel and overall management of SMH, Inc., his wife, Mavis Rockyhill in the kitchen, and John Rockyhill Jr. in front of the house and bar. The Rockyhill Family had established a statewide reputation for clean rooms, along with good food and generous drinks all at a reasonable price.

SMH Business Summary:

• A full service hotel with 90 rooms

• A 120-seat restaurant & bar

• Open for Breakfast, Lunch & Dinner - 7 days a week

• The physical plant is a traditional double loaded slab constructed ?on the water. Note: The hotel and restaurant are over 50 years old and are in need of a major renovation.

The Present

Two years ago, the Rockyhill Family decided to sell the business as John Jr. (the Rockyhill family's sole heir) had a problem with alcohol and did not want the responsibility of running the family business. Because the hotel and restaurant/bar had an excellent reputation initially there was a lot of buyer interest when the family announced that ?the SMH was for sale after three decades of family management. Unfortunately, the local economy was still struggling after the last recession, gas prices continued to soar, and revenues and occupancy were trending downward at an alarming rate. Adding to the increasingly desperate situation, Mavis Rockyhill- who had always masterfully managed the back of the house operations for the restaurant - developed health problems of her own and retired from day to day operations leaving her son John, Jr. in charge

Desperate to sell, John Jr. took over all responsibility for the restaurant and bar. He thought he could reverse the downward trend by hiring a group of new, pretty, young college woman, putting them in new skimpy cocktail uniforms, paying them at below the state minimum wage (but augmenting their wages with a bar surcharge on the guest bill which was to be shared equally between the servers and the house.) All bar employees would be hired/recruited from the local community college in order to lower labor costs and also to attract a younger crowd to the operation.

Unfortunately, over the last six months restaurant revenues continued a steep decline. The restaurant also experienced a further drop in their regular customer base and saw their beverage cost in the bar operation soar with a 20% increase in costs over a year ago.

There was a good deal of disagreement among the members of the family management team (father and son) about the direction of the operation and what to do about continued reports of theft and complaints of sexual harassment by the new staff regarding John Jr. that began to surface. In addition, MHV was on the receiving end of a threatened law suit by a 25 year old male student, who was experienced and qualified to serve drinks, but who was not hired because the new uniforms were intended for women exclusively.

John Sr. when confronted with these reports, stated that John Jr. was an alcoholic, but "didn't mean anything" by the occasional ‘hug, grab, and squeeze' because he couldn't help himself - after all alcoholism is a disease. After all, they were the ones that choose to go to work wearing a sexy out t every day. What did they expect? John Sr. was also of the belief that servers were most likely using this issue as a distraction to ‘steal them blind' because of John Jr.'s ‘good heart but lack of supervisory skills' and wanted to hire "secret shoppers" to nd out how and when the theft was occurring.

Case Study Analysis Questions

• Answer the following questions regarding the new wage system introduced by SMH for servers in the bar and restaurant.

Were the servers being fairly compensated?

Was there a violation of law regarding hourly wage rates?

Did the new system act as an incentive to motivate the staff? If not, what would you change?

• How should John Sr. address the issue of allegations of sexual harassment by his son?

• What is the responsibility, if any, of the SMH to John Jr. regarding his purported alcoholism?

• Does the threatened law suit by the 25 year old male student have any merit? If so, what is the basis for his law suit? Are there ways that SMH could shield itself from possible liability?

• What evidentiary weight does testimony from a "secret shopper" have when dealing with allegations of employee theft?