Starting off the year with one foot on a banana peel, Denny’s reported an unexpected decline in same-store sales in both January and February, despite finishing 2024 off fairly strong. The company has since experienced a drastic stock plunge of over 20-percent, and as a result, has allocated 150 restaurants for closure. In 2024, Denny’s closed 88 of those locations, with anywhere from 70 to 90 more scheduled for this year.
“In any mature brand, when restaurants have been open that long, it is natural that trade areas can shift over time,” CFO Robert Verostek explained during an analysts earnings call on Wednesday. As per Verostek, closing more restaurants will only improve the franchisee cash flow, allowing individual restaurants to invest in the improvements they need, such as remodels.
To offer a bit more insight, the restaurants that Denny’s has already closed each had average unit volumes of under $1.1 million. These locations had been open for upwards of 30 years. Moving forward, under the direction of CEO Kelli Valade, the company plans to open 25 to 40 new restaurants between Denny’s and its sister concept, Keke’s Breakfast Cafe. The plan aims to reach average unit volumes of $2.2 million for each new location, though there might already be a hiccup in the plan.
Denny'sIMAGO / Dreamstime
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Executives are optimistic that same-store sales will improve for Denny’s as the year plays out, though they are still taking a conservative approach in the meantime. By putting all faith in its three virtual brands (The Burger Den, The Meltdown and Banda Burrito), Denny’s plans to drive incremental sales during dinner and late night hours to make ends meet.
“Denny's is uniquely positioned to build a sizable virtual brand business, given our labor structure and these transactions over-indexing at dinner and late night when we can leverage our labor line to generate incremental profitability for the system,” Valade explained. “As we grow through this year, we are confident that we will get into that guidance range and move hopefully towards the top end.”
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