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Derreck Johnson, who is currently running for the citywide “at-large” seat on Oakland’s City Council, has described himself as “a small business owner” whose Home of Chicken and Waffles restaurant is loved for its soul food and its practice of hiring formerly incarcerated people.
Media coverage of Johnson’s campaign has frequently described him as a restaurant owner, one who’s had to make tough management decisions this year because of the pandemic, including laying off staff at Home of Chicken and Waffles due to falling sales. According to news reports, he responded with innovative business partnerships, like getting paid to feed essential workers through a program set up by the Golden State Warriors. In July, the Chronicle noted that Johnson “still recruits former inmates to work at his soul food restaurant.” And in his interview with The Oaklandside last month, Johnson told us he owns Home of Chicken and Waffles and that sales at the restaurant fell 20% this year because the Warriors left Oakland. If elected, he said, he’ll bring his business experience to his new role on the City Council.
Johnson has been endorsed by Mayor Libby Schaaf, U.S. Senator Kamala Harris, Assemblymember Buffy Wicks, and the East Bay Times newspaper, among others. He has also raised over $187,000 for his campaign, another strong sign of support.
But Johnson doesn’t own Home of Chicken and Waffles, or any other restaurant or business.
In an interview on Tuesday, he acknowledged that he doesn’t currently own a stake in any businesses, and that he hasn’t owned Oakland’s Home of Chicken and Waffles since 2017, when it was taken from him in bankruptcy. Several of his former employees own it.
“Everyone just calls me the owner, so I’m just like, ok, fine,” he told The Oaklandside. “I’m currently the founder.”
Johnson doesn’t appear to have done anything to correct the widespread misperception that he still owns the well-known Oakland restaurant. He is described on the city and the county’s elections websites as a “small business owner.” He spoke on a Chamber of Commerce panel about workplace diversity and the pandemic in September, where he was described as the “owner” of Home of Chicken and Waffles. And in a Facebook post in May, he described himself as a “small business owner whose employees depend on a functioning economy and a paycheck.”
Asked why he hasn’t made it clear he no longer owns the business, Johnson said, “No one has ever asked me if I’ve owned the restaurant until you. I’m very forthcoming telling what the story is.”
Johnson told us he serves as an “adviser” and serves as the public face of Home of Chicken and Waffles in media appearances, but isn’t “involved in the operations anymore.”
Founding the restaurant with a friend, and struggling through a lawsuit, debts, and bankruptcy
Johnson started Home of Chicken and Waffles in Oakland’s Jack London Square with his childhood friend, Michael Wilson, in 2004, but the two had a falling out. Wilson filed a lawsuit that year claiming he was owed half of the business’s profits. A judge found in Wilson’s favor in 2006. Johnson told us he didn’t owe Wilson much money, but lawyers’ fees added up to tens of thousands that the restaurant had trouble paying back.
“He filed a lawsuit. We went to court. What cost me a lot of money was I’d never been sued. Attorney fees were like $8,000 to $10,000 a month,” said Johnson.
The restaurant didn’t do well during the recession two years later. And after 2009, according to court papers filed by Johnson and an attorney representing the restaurant, Johnson discovered that “there was a lot of misreporting and monies being stolen by former employees and management.”
In 2014, Home of Chicken and Waffles owed over $1 million in debt and unpaid bills, including approximately $850,000 in unpaid state and federal taxes.
At the same time, Johnson had stopped paying the restaurant’s workers’ compensation insurance policy. In October 2014, Hartford Fire Insurance filed a lawsuit against the restaurant over an unpaid bill of $24,000. And the year before, a Home of Chicken and Waffles server was awarded a $2,227 judgment by the state Labor Commissioner because she was made to work during breaks.
Johnson filed for Chapter 11 bankruptcy in November 2014, a type of bankruptcy that would allow the restaurant a temporary reprieve from its creditors and a restructuring of its debts that could help it someday become profitable again.
The bankruptcy case didn’t go smoothly. The Office of the U.S. Trustee, which oversees bankruptcy cases, wrote in court filings that Johnson was wrongfully pulling money out of the restaurant to pay himself and another company owned by a family member and friends. The government wrote that Home of Chicken and Waffles was being “grossly mismanaged” by Johnson.
“During the time Mr. Johnson saw fit to pay himself, the Debtor [Home of Chicken and Waffles Restaurant] was insolvent, and Mr. Johnson left other creditors—most notably taxing authorities—unpaid to the tune of hundreds of thousands of dollars,” attorneys for the government wrote in a court brief.
The government also accused Johnson of lacking “basic knowledge” about the restaurant’s finances and noted that he was failing to file accurate monthly operating reports showing the restaurant’s profits and losses.
Asked about this, Johnson told The Oaklandside that while the bankruptcy case was proceeding in 2015, he was trying his best to keep his restaurant afloat, avoid laying off employees, and support a second Home of Chicken and Waffles restaurant located in Walnut Creek, which was owned by a family member and friends and has since closed.
“I was robbing Peter to pay Paul to keep those open, and draining Oakland.” He was taking funds from the original Jack London restaurant and putting them into the Walnut Creek outpost. “So, bad management? I would have to say yes, I’m very accountable. Poor decision making, yeah. But at the same time, I was only motivated to keep the people employed,” he said.
The judge hearing the case agreed with the government’s attorneys and decided to convert it into a Chapter 7 bankruptcy, rather than Chapter 11. This meant Johnson wouldn’t have a chance to restructure the restaurant’s debts and potentially make it profitable down the road.
In November 2017, Johnson lost Home of Chicken and Waffles. One of his former employees, Hector Mireles, took over ownership of the restaurant through a company called AllCali Products, Inc. A liquor license owned by Johnson, worth tens of thousands of dollars, was transferred to Mireles and others.
Reached by phone, Mireles declined to speak to The Oaklandside. “I don’t want to get involved in it,” he said.
Johnson said the experiences of being sued by his childhood friend and business partner, and later losing his business, was tough, but he’s glad that he’s since reconciled with Wilson. “To have that relationship interrupted and us being divided for ten years was hurtful,” he said. “We were so close and so personal that we didn’t take care of business and put together a partnership agreement.”
He added that the reasons he’s running for council remain the same. He’s concerned about the direction of the city, especially the growing homelessness crisis and illegal dumping. And he said he knew his personal and business history would come up at some point in the campaign.
“When I decided to run, I knew I would become a public figure, and I thought, can I do this? I have bankruptcy, I have tax issues.” He added, “At the end of the day, I’m not perfect.”