Denny’s Corp., the family-dining brand, is highlighting convenience by continuing to expand operating hours, providing off-premises options with its virtual brands and testing alcohol at its Keke’s Inc. daytime breakfast café offerings, executives said Tuesday.
The Spartanburg, S.C.-based company, which reported fourth quarter earnings Tuesday for the period ended Dec. 27, in January said it was expanding its virtual brands — The Meltdown, Burger Den and Banda Burrito — with a new test agreement with Franklin Junction and its Host Kitchen program for 250 locations.
Kelli Valade, Denny’s CEO and president, said in an fourth-quarter earning call: “We remain focused on providing convenience through our off-premises business. … Off-premises sales were approximately 20% of total sales, up from 19% in the third quarter. We feel good about this sales mix considering that many in our industry are actually experiencing sales declines in this channel.”
Valade said the virtual brands were a possible tool for California franchisees, who were dealing with the labor impact of the wage increases mandated in the state.
“For us,” Valade said, “these channels provide a unique opportunity to leverage operating capacity at dinner and late-night to a distinctly new consumer. For these reasons, this will continue to be a part of our strategies which is why we're leaning into testing our third virtual brand with Banda Burrito and why we're leaning into a test with Franklin Junction, a global leader in branded virtual restaurants.”
Valade said Denny’s in the first quarter opened its first Keke’s daytime breakfast café, which it acquired in 2022, outside its home state of Florida in Hendersonville, Tenn., just outside Nashville.
“With this new location, we debuted a new cafe design an updated look and feel that was developed through our learnings from last year's brand ethos work,” Valade said.
“We've also now launched a new menu in this location and in all existing Keke’s restaurants,” she said. “This menu offers a simplified approach with less items and a focus on what we know Keke’s does best.”
The Hendersonville Keke’s location did not open with the alcohol beverage program that the brand is testing, Valade added.
“The alcohol program test was a success, and a systemwide rollout now is underway,” she said. “This program will become a brand standard and a requirement for all new cafe openings.”
Valade said the company was encouraged by sales of the “simplified approach” with mimosas and sangrias, which are about 5% to 7% of the sales mix — which goes higher on weekends.
“We are excited about what that can do for the Keke’s system in terms of rolling that alcohol program,” she said, adding that a remodeling program would likely help sales in Keke’s original Florida market.
Robert Verostek, Denny’s chief financial officer, said, “We already have another corporate cafe under construction in Tennessee, right now. We have another corporate cafe in Jacksonville, [Fla.,] under construction right now. And you will see us move into Texas. … So, we'll be in places other than Florida and Tennessee this year.
Denny’s has continued to work toward returning to 24/7 operating hours, which were curtailed during the March 2020-declared coronavirus pandemic. Verostek said the return has “leveled off at about the 75% level.”
“I don't think I don't think you'll see material growth from here, nor do I think you'll see a material slide from here,” Verostek told analysts.
For the fourth quarter ended Dec. 17, Denny’s net income was $2.9 million, or five cents a share, compared to $12.8 million, or 22 cents a share, in the prior-year period. Revenue was $114.4 million compared to $120.8 million in the same quarter last year.
Denny's domestic systemwide same-store sales were up 1.3% compared to the same quarter in 2022, including an increase of 1.5% at domestic franchised restaurants and a decline of 1.2% at company-owned restaurants.
As of Dec. 27, Denny’s had 1,631 restaurants, 1,558 of which were franchised and licensed restaurants and 73 of which were company-operated. The total included both the Denny’s and Keke’s brands. As of Dec. 27, the Denny's brand had of 1,573 global restaurants, 1,508 of which were franchised and licensed restaurants and 65 of which were company-operated. In the period, the Keke's brand had 58 restaurants, 50 of which were franchised restaurants and eight of which were company-operated.
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