Denny’s has revealed a significant restructuring plan as part of its efforts to rejuvenate the restaurant chain, which has been facing increasing challenges in the competitive family dining sector. During an investor’s conference, management disclosed that approximately 150 underperforming locations—about 10% of its total units—are being targeted for closure due to their adverse impact on the system’s overall health. CEO Kelli Valade emphasized the need for these closures, noting that about half of the flagged restaurants would be shut down by the end of this year, while the remaining would follow suit in 2025. The decision comes in the wake of a slight decline in same-store sales, highlighting the necessity of this strategic move to achieve the company’s ambitious goal of raising average annual unit sales to $2.2 million.
The identified underperforming units are primarily stationed in older markets that have undergone significant changes in consumer behaviour, which has impacted their financial performance. Denny’s Chief Development Officer, Steve Dunn, elaborated that a thorough review of all domestic units revealed that the weakest segment was exacerbating the brand’s downturn. Valade acknowledged the broader trend affecting the family dining industry, citing a considerable decrease in sales post-COVID, and how many competitors are similarly contracting their operations to remain viable in a challenging market.
Denny’s strategic plans include a substantial renovation initiative branded as Diner 2.0, aimed at standardizing the appearance of its locations while also refreshing their décor in alignment with modern consumer expectations. To incentivize franchisees to invest in these upgrades, the company is offering financial support, including grants for renovations and a dedicated loan pool totaling $25 million. Restaurants that opt for the facelift can expect a sizable uplift in sales based on past data, suggesting that updated environments resonate positively with customers and can boost traffic significantly.
In conjunction with these operational changes, the company is recalibrating its hours of operation. Valade indicated a departure from the pre-pandemic model of all units remaining open 24/7, with about 25% of the system currently opting for reduced hours. This shift reflects Denny’s focus on optimizing profitability amidst fluctuating customer traffic rather than attempting to maintain a traditional 24-hour service model. This adaptability aligns with the chain’s overarching strategy to meet evolving customer preferences while pursuing long-term sustainability.
Additionally, Denny’s management is putting considerable emphasis on value-driven offerings, as evidenced by customers increasingly opting for kids’ meals to manage their expenses. The brand aims to attract both new and lapsed customers through a focus on value, menu innovations, and the strengthening of its virtual concepts. Denny’s has successfully launched three digital brands, generating significant revenue, and is exploring further expansions within this area with new product offerings designed to drive engagement and sales.
Lastly, attention was drawn to Denny’s sister brand, Keke’s Breakfast Café, which is also poised for growth following a minor decline in same-store sales. The management has plans for aggressive expansion, backed by development agreements for 140 new locations mainly through existing Denny’s franchisees. With this approach, Denny’s aims to leverage synergies from its core brand to expand successfully into this breakfast-focused concept, underlining its reliance on its franchise network for growth and resilience within the competitive dining landscape. These strategies collectively illustrate Denny’s determined path toward revitalization amid a challenging economic backdrop, with a clear focus on operational efficiency, brand consistency, and customer value.