Denny’s Corp., parent to the family-dining chain and Keke’s Inc daytime breakfast café, will be expanding its agreement with Franklin Junction, the virtual-restaurant company, the company said this week.
The Spartanburg, S.C.-based company said the agreement provides that Franklin Junction will partner with at least 250 domestic Denny’s restaurants to accelerate Denny’s market presence through its innovative Host Kitchen platform.
“Our off-premises sales channels are a unique strength for Denny’s, and we are excited about the opportunity to further advance our leadership position in the market,” said Kelli Valade, Denny’s president and CEO, in a statement. “This new partnership with Franklin Junction will allow us to deliver even more amazing guests experiences.”
Valade told ICR Conference 2024 attendees in Orlando, Fla., earlier this week: “We have a franchisee in test with Franklin Junction who has had incredible results so far; and, based on that, we signed agreement to add 250 locations at minimum. This would clearly be an opportunity to expand our already successful off-premises business and we're excited about the potential success.”
Franklin Junction’s Host Kitchen platform allows restaurant brands access in new markets as virtual restaurants. Orders are produced locally by Franklin Junction’s Host Kitchen fulfillment partners.
“We are excited to collaborate with Denny’s to host new virtual concepts through their vast restaurant footprint,” said Rishi Nigam, Franklin Junction’s CEO and do-founder.
In October, Denny’s said it was testing a third virtual brand, Banda Burrito, and a franchisee was working with the Franklin Junction marketplace as the family-dining concept looks to continue capturing off-premises business.
Off-premises sales were about 19% of its total sales in the third quarter, said Valade after the company released earnings for period ended Sept. 27.
“We feel good about this, especially considering that many in our industry are experiencing actual sales declines in this channel,” Valade said on an earnings call. “Even better, most recently, we've started to see an uptick in our off-premises sales, hitting above 20% by the end of quarter three, further showing that off-premises channels are consistently strong for us and a way to leverage operating capacity at dinner and late night to a new consumer.”
Denny’s has two existing virtual brands, the Burger Den and The Meltdown, both introduced in 2021, and is testing a third in California: Banda Burrito.
“We've been in alpha testing of Banda Burrito in 10 locations, and based on positive results, we'll be expanding it to an additional 80 locations next month,” Valade told analysts. “We are primarily focusing this concept in California and believe it has potential to efficiently expand our off-premises business with popular regional flavors while leveraging many existing SKUs [stock keeping units] in our pantry.”
Robert Verostek, Denny’s chief financial officer, added that a Denny’s franchisee “is currently in test with Franklin Junction” with virtual brands in about 20 restaurants. Atlanta-based Franklin Junction is a host kitchen marketplace with more than a dozen brands, ranging from Arthur Treacher’s Fish & Chips to Wing Depo.
For the third quarter ended Sept. 27, Denny’s reported net income of $7.9 million, or 14 cents a share, compared to $17.1 million, or 29 cents a share, in the prior-year period. Revenues slipped to $114.2 million from $117.5 million in the prior-year quarter.
Denny's domestic systemwide same-store sales were up 1.8% compared to the period in 2022, including an increase of 2.1% at franchised restaurants and a decline of 1.4% at company restaurants.
Denny’s, as of Sept. 27, had 1,644 restaurants, 1,570 of which were franchised and licensed restaurants and 74 of which were company operated. Of those, 1,588 were Denny’s (1,522 franchised and 66 company-owned) and 56 were Keke’s (48 franchised and eight company-owned).
Alicia Kelso, Nation’s Restaurant News executive editor, contributed to this report.
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