Denn-Ohio LLC, a Denny’s franchisee in Kentucky, Michigan, and Ohio, has filed for Chapter 11 bankruptcy protection, seeking to close two more diner units and facing a hearing in December, court documents indicate.
Denn-Ohio, which expects to have eight diners remaining after it closes units in Toledo, Ohio, and Kalamazoo, Mich., filed its Chapter 11 petition on Oct. 31 in the Bankruptcy Court for the Western District of Michigan.
The presiding bankruptcy judge filed an order for a hearing on the case Dec. 13.
Filings indicate the company, which once operated 27 Denny’s locations, expects after the Toledo and Kalamazoo closures, to have units in Kentucky (Elizabethtown and Louisville), Michigan (Grand Rapids and Wyoming) and Ohio (Berkshire Township, Columbus, Jeffersonville, Perrysburg).
Thomas F. Pilbeam Sr., Denn-Ohio’s co-founder, chief operating officer and chief financial officer, said, that although the company experienced “substantial growth from 2009 to 2019, beginning in approximately 2020, economic challenges, some related to the COVID-19 pandemic and others more inherent to the restaurant business, negatively impact its operations.
“For example, increase labor, food, and delivery expenses decreased debtor’s net operating income. Increased costs to complete require renovations and post-COVID trends toward increased delivery sales also result in additional economic hardship,” he continued.
Pilbeam’s partner, Jack Thompson unexpectedly died in December 2019, “which created additional operational challenges,” the documents said.
“Based on analysis and projections, debtor anticipates that it will close two additional underperforming location in Toledo and Kalamazoo, which will result in the remaining eight stores producing sufficient sales to pay is ongoing reduced operating expenses and success reorganized its pre-bankruptcy debt through this Chapter 11 proceeding,” the filing indicated.
Chioke Elmore, vice president of franchise operations for Spartanburg, S.C.-based Denny’s Corp., in an emailed statement, said: “It is unfortunate that our franchisee closed several locations. We appreciate the dedicated team members who worked at those restaurants and the patronage of the many guests who dined at those locations over the years.
"The franchisee was severely impacted by the COVID-19 pandemic and encountered ongoing challenges as a result," Elmore said. "Denny’s works closely with our franchise owners to assist them through headwinds, however, the final decision to close restaurant locations is in the hands of each franchise business owner based on their particular circumstances.”
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, 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).
Update Nov. 7, 2023: This story has been edited to include a statement from Denny's Corp.
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