Nearly every usual measure of a restaurant chain’s financial performance declined for the Denny’s family dining brand in the second quarter ended June 26, from same-store sales (down 0.6% despite a five-point lift from pricing) to company-unit margins (13.2%, versus 15.4% a year ago).
Parent Denny’s Corp. also revealed that franchisees closed 15 units during the quarter, largely because of lease expirations, and expects as many as 15 more to close by the end of the fiscal year. The Denny’s chain ended the quarter with 1,541 branches, which reflected three openings.
The company said it will attempt to pull customers back to the diner chain by resurrecting Denny’s $2/$4/$6/$8 tiered menu, with a $10 bracket added to the menu. The presentation enables customers to shop for selections within a pricing band that’s comfortable for them. The special bill of fare had been discontinued a number of years ago.
CEO Kelli Valade said the menu immediately spurred an increase in traffic where its reincarnation was tested, and that those gains have persisted.
The Denny’s brand is also rolling out its Banda Burritos virtual concept systemwide after expanding the availability to 300 stores during Q2. The brand is the chain’s third delivery-only operation, joining Burger Den, a burger operation, and The Meltdown, a grilled cheese concept.
Off-premise business generated about $8,000 in weekly sales for Denny’s in the quarter, or roughly 20% of the chain’s weekly average unit volume of $38,000.
She attributed Denny’s sales erosion to patrons cooking more at home as restaurant prices have risen faster than grocery expenses.
In addition, “We can see some change in check…Beverage incidence is down slightly,” she said.
Valade also revealed that the company will expand its second brick-and-mortar brand, Keke’s, to Texas and California through a combination of franchising and corporate development. Franchisees had been waiting to see how the first company units developed outside of Keke’s home base of Florida would fare. Valade was effusive in describing the performance of those non-Florida stores, both of which opened in Tennessee.
Same-store sales for the 62-unit Keke’s chain fell 4.6% for the quarter. The concept serves a menu of freshly made breakfast, lunch and brunch items, and is currently rolling out alcoholic beverages.
Valade nevertheless cast Keke’s performance in a positive light, citing the extremely trying conditions that restaurants have been facing in Florida.
Overall, Denny’s Q2 net income totaled $3.6 million, a 58.2% drop from the year-ago quarter, on revenues of $115.9 million, down 0.8%.
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