N-alkyl polyhydroxy alkyl amines such as N-methyl glucamine having a Gardner Color of less than 1 are reacted with sources of fatty acyl groups such as methyl esters, anhydrides, and/or fatty acids that have greater than 98% transmittance at 460 nm in organic hydroxy solvents such as methanol to prepare N-alkyl polyhydroxy amine amides with good color. The N-alkyl polyhydroxyamines can be purified by crystallization, and/or subjected to reductive bleaching, to provide superior color. The reaction is preferably carried out at low temperature for short periods of time and with low catalyst levels to minimize formation of cyclic products. The resulting amide product can be further purified by treatment with anionic and cationic exchange resins to remove soap and amine impurities. The anionic ion exchange resin can be readily regenerated by acidifying it followed by washing with an organic solvent.