Denny’s Corp. has put near-term focus on three areas — staffing, a return to full-day 24-7 opening hours and its value platform — as it continues to recover from pandemic restrictions, the CEO told the ICR Conference on Tuesday.
Spartanburg, S.C.-based Denny’s family-dining brand, which acquired the 50-plus unit Keke’s Breakfast Café last year, since mid-year 2022 has “been encouraged by improving traffic trends,” according to Kelli Valade, CEO of the company, in a presentation at the 25th annual ICR Conference in Orlando, Fla.
Ahead of the presentation, Denny’s on Monday released preliminary fourth-quarter same-store sales, saying they grew 2% from the same period last year, including a 1.7% increase at domestic franchised restaurants and a 6% increase at company restaurants. The company expects to release full results for the Dec. 28-ended year after the market closes on Feb. 13.
Pandemic-easing staffing remains a challenge, Valade said. “We have seen progress at Denny's — and in the industry — which gives us reason to be optimistic,” Valade said. “Our staffing levels at company restaurants are comparable to pre-pandemic levels. And we're seeing notable reductions in turnover; in fact through the third-quarter Denny's rolling 12-month management turnover exceeded and was better than the family dining index by over 600 basis points.”
Valade said Denny’s operations team has partnered with the Indeed hiring platform to conduct virtual hiring events.
As operators staff up their restaurants, Valade said Denny’s is pushing to take advantage of the 24-7 opening hours, which she said was “a significant tailwind opportunity, as we know the demand for the late-night dining occasion is ever-present.”
The company has launched “a modest financial incentive to motivate our franchise restaurants to accelerate their path to 24/7,” she said. More than 63% of the domestic Denny's restaurants are now open 24 hours, Valade added, and that represents a 10-percentage-point improvement in the last six months of 2022.
“Approximately 5% of our domestic system was not 24/7 prior to the pandemic, for various reasons,” Valade explained, “and we've agreed on a case-by-case basis to look at the entire system to make sure it makes sense. We believe that through this process we could have up to additional maybe 5% that will ultimately not return to 24/7 operations but we will still be able to capitalize on this strength and unique equity of the Denny’s brand.”
Valade said Denny’s is also focused on driving profitable sales and growing traffic through its value platform.
“Our current barbell strategy balances our LTO messaging with profitable traffic-driving products,” she said. “Denny's is after all known for everyday value. We understand that value comes in different forms, but in this inflationary environment many guests seek to maximize the effect on their dollars with quality food options for the entire family. With this in mind, in September we launched our All-Day Diner Meals diner deals menu.” The meals range from $5.99 to $10.59.
“We're excited about this new value platform,” she said. “We think it has legs. You'll see us massage and leverage that platform throughout the year to make sure that guests know they can count on us for great value.”
To help in menu development, Denny’s kitchen modernization program is about 95% complete, which Valade said will offer the opportunity for more innovation — including an oven for preparation of items at the dinner daypart.
The company on Monday also announced Sherri Landry would be joining Denny's as the new chief marketing officer, succeeding John Dillon, who last year was named president of the concept. Landry most recently was CMO of CEC Entertainment, parent to the Chuck E. Cheese’s and Peter Piper Pizza brands, and has worth with TGI Fridays and Yum Brands
Landry will “provide a deeper focus to consumer insights and help to elevate our brand relevance,” Valade said.
Another priority was technology, including a cloud-based point-of-sale system, server tablets and quick-response, or QR, code payments to improve the customer pay experience.
Valade added that Denny’s expects to accelerate franchising of the the Keke’s Breakfast Café brand, which prior to its acquisition in the middle of 2022, was adding five restaurants a year.
“Demand for the day-time eatery segment remains strong and Keke’s is well-positioned to become a bigger player in the segment that's pretty fragmented and fractured amongst many smaller brands,” Valade said.
For the third quarter ended Sept. 28, Denny’s net income was $17.1 million, or 29 cents a share, up from $12.3 million, or 19 cents a share, in the same period last year. Revenue was up 13.2% to $117.5 million from $103.8 million in the prior-year quarter.
Third-quarter systemwide same-store sales were up 1.5% compared to the same period of 2021 and included a 1.1% increase at domestic franchised restaurants and a 7.1% increase at company restaurants.
As of Dec. 28, Denny’s had 1,656 restaurants, 1,582 of those franchised and licensed and 74 company operated. The Denny’s brand had 1,602 restaurants, 1,536 of those franchised. The Keke’s brand had 54 restaurants, all in Florida, with 46 of those franchised.
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