Family-dining restaurant brand furloughs 25% of corporate staff, reduces other expenses
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Denny’s Corp.’s domestic same-store sales in April were down 76% compared to the same month of 2019, the company said Monday in a preliminary release of figures.
The Spartanburg, S.C.-based family-dining brand, which will announce first-quarter earnings on May 14, also said in a business update that it was offering franchisees support with fee deferrals and rent relief and reducing expenses with pay cuts and the furloughing of 25% of its corporate staff.
First-quarter 2020 domestic systemwide same-store sales declined 6.3%, the company said, and preliminary results for April in the second quarter showed marked sales declines.
“The COVID-19 pandemic and various related government mandates restricting dine-in restaurant service have continued to disrupt domestic and international operations for Denny’s Corp. and its franchisees,” the company said.
For the week ended April 1, same store sales were down 79% and improved only slightly through the month: down 78% in the week ended April 8, down 76% in the week ended April 15 and down 72% in the week ended April 22.
As of May 1, about 74% of domestic and international Denny’s restaurants were operating solely or primarily with take-out and delivery options, the company said.
The brand said it built average unit off-premise sales 107% from February to April by temporarily waiving delivery fees, offering curbside service and launching family-meal packs.
As the company looks to reopening dining rooms as state and city COVID-19 restrictions are eased, Denny’s said it has sent information to units about social-distancing and other standards.
“Additional training materials have been developed and communicated to the entire system of restaurants in anticipation of dine-in service restrictions starting to ease and additional health and safety measures that will be implemented as they do,” the company said.
The company has deferred remodels, some royalty and advertising fees and leases for franchisees operating in properties owned by the company.
“Additionally, the company has secured rent relief in the form of abatements or deferrals for over 70% of the leases in which the company is a lessee, including those instances in which the company subleases to franchisees and will be extending the same relief as a pass through,” the update said.
At the corporate level, the company has also made expense-saving moves, including suspended travel, cancellation of in-person field meetings, holds on all open corporate and field positions, reduced staffing in company units, cuts in director and executive compensation and furloughs of 25% of the corporate staff.
Prior to March 25, the end of the first quarter, the company borrowed $40.5 million under its existing revolving credit facility to ensure liquidity. As of that date, Denny’s had about $39.2 million of cash and cash equivalents and outstanding borrowing under its revolving credit facility of $318 million, leaving availability of $62.7 million.
In the second quarter, it has borrowed an additional $20 million under its revolving credit facility to ensure additional liquidity. As of May 1, it had about $51.1 million of cash and cash equivalents and outstanding borrowing under its revolving credit facility of $338 million, leaving availability of $43.6 million.
Denny’s warned that it would not be in compliance with certain financial covenants in the second quarter that ends June 24. “The company is in the process of seeking an amendment to its revolving credit facility and currently expects to be able to enter into an amendment on or around May 13,” the update said.
For the fourth quarter ended Dec. 25, Denny’s said net income rose to $117.4 million, or $1.90 a share, from $43.7 million, or 67 cents a share, in the same period last year. With the refranchising, revenues were $541.4 million in the quarter, compared to $630.2 million in the prior-year period.
Fourth-quarter domestic systemwide same-store sales increased 1.7%, including a 0.5% increase at company restaurants and a 1.8% increase at domestic franchised restaurants.
As of Dec. 25, Denny’s had 1,703 franchised, licensed and company restaurants around the world including 144 restaurants abroad.
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