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As Richards Group hemorrhages clients, Dallas ad industry leaders warn of potential ripple effects

Legendary founder Stan Richards acknowledged the loss of clients like Home Depot and Motel 6 means the agency will get smaller.

Advertising executives in Dallas are worried about the ripple effects through the region’s creative community from a big-name advertising agency’s big-time loss of marquee clients.

The Richards Group, the largest ad agency headquartered in Dallas with about 650 employees, expects to make staff cuts as the reality of this week’s mass exodus of longtime clients settles into its bottom line. The defections followed a furor over founder Stan Richards' description of a new ad campaign idea as being “too Black” for Carrollton-based budget chain Motel 6.

Owen Hannay, chief executive of Dallas-based ad agency Slingshot, is concerned The Richards Group will have to shed “hundreds of employees into an advertising community that can’t absorb them.”

“And that’s just the Richards Group, folks,” he said. “You start looking at the edit companies, the freelancers, the shooters. ... The service side of the advertising business beyond the agencies is going to suffer mightily because they can’t replace that business.”

Richards' 44-year run at the helm of his namesake agency came to a sudden end Thursday, when he effectively fired himself over racially insensitive remarks he made during an internal meeting with about 40 employees.

After his comments were publicized, Motel 6 promptly fired the agency and set off a week of bleeding that saw a half-dozen well-known brands and the Salvation Army charitable organization sever ties with the company. Many had worked with The Richards Group for decades.

Hannay said it’s very unlikely that a national client like home improvement retailer Home Depot is going to hire another Dallas agency.

The client drain also could hit creative companies that Richards spun off over the years with other advertising professionals, said Leon Banowetz, president and owner of Dallas ad agency Banowetz + Co.

Richards spun off a multicultural agency called Richards/Lerma with agency veteran Pete Lerma in 2009. The agency rebranded earlier this year to simply Lerma. Two weeks ago, Richards Group veterans Pete Lempert and Dave Kroencke launched a new consulting group called Richards Venture.

“When something happens like this in one corner of our community, it impacts all of us,” Hawkeye agency CEO W. Joe DeMiero said, describing Dallas' creative and advertising community as tight-knit.

Hawkeye has about 250 employees in Dallas and a total of 931 spread across 20 offices around the U.S., and 23 globally.

In Dallas, it’s typical for creative professionals to flow between The Richards Group and Hawkeye during their careers and vice-versa, DeMiero said. He said he thinks his agency could absorb some Richards staffers.

“If there’s any silver lining in what is a horrible situation, it is that more and more clients are demanding that their partners' values align with their values,” DeMiero said.

The 38-year-old executive said he has also seen a shift in how large companies view their relationships with ad agencies.

Hawkeye, one of the largest agencies in Dallas, has added 18 clients to its business during the COVID-19 pandemic and almost all required data or a commitment to diversity and inclusion, he said.

“Transformation in the creative industry is going to require the buy-side demanding it of the supply-side, and the supply-side stepping up and meeting those demands in a way that is proactive,” DeMiero said.

The University of Texas at Austin, where an advertising and public relations school is named after Richards, on Friday released a recorded apology from Richards to the university and its students. He said in the video that he’s never tolerated racial slurs and doesn’t condone white supremacy, but acknowledged that his remarks were the biggest mistake of his life.

“In that moment, I wiped out years of trust,” he said. “I could hide from this, but I believe it’s better to own it.”

Dom DiFurio. Dom is a staff writer covering breaking business news. He writes about the companies and transactions that shape life in North Texas. Dom considers himself among the many transplants that moved to Texas from the crowded coasts who found more than enough reasons to call it home.

ddifurio@dallasnews.com /domdifurio @DomDiFurio
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