After plotting Denny’s strategic plan in broadly general terms during her first year as CEO, Kelli Valade detailed a slew of specific initiatives Tuesday for the diner chain, ranging from a new life-improvement perk for unit operators to how the brand cooks its bacon.
She also revealed the company’s next steps in absorbing Keke’s Breakfast Café, the breakfast-and-lunch concept Denny’s acquired in July for $82.5 million. Those new moves include testing alcoholic beverages, a key source of sales and profits for Keke’s competitors.
The corporate update also included a snapshot of where Denny’s is in its quest to resume 24-hour service systemwide for the company’s namesake brand. Valade noted that 71% of U.S. Denny’s units are now open around the clock.
That compares with 67% in February, prompting a financial analyst participating in the company’s post-earnings conference call to question if Denny’s can get 90% of its domestic stores operating 24/7 again, a goal set previously by management. Valade assured the questioner that the chain will continue to work toward that goal but made no promises on timing.
Initiatives that were begun during the first quarter failed to push traffic for the Denny’s brand into positive territory, Denny’s corporate CFO Robert Verostek indicated. He characterized guest counts for the period as “roughly flat,” though pricing and sales-mix shifts yielded a systemwide same-store sales gain of 8.4% from a year ago.
The systemwide figure masks a gaping difference between the comps of franchised and company-run stores. Same store sales for the licensed units grew 8.1% during Q1, while corporate units generated a rise of 11.4%.
The common thread running through the initiatives disclosed for the Denny’s brand was the promise of greater unit efficiencies. Switching to batch-cooking bacon and sausage, instead of preparing the sides order by order, has already saved cooks one hour each of prep time per day, Valade said. She said the switch has also bolstered product consistency.
Similarly, she revealed, all of Denny’s domestic stores have adopted the same internet network. “This will enable improved kitchen verification systems, server tablets and QR pay, each focused on consistent operational execution, labor efficiencies and enhanced guest experiences,” Valade said, according to a transcript provided by the financial services company Sentieo.
Being on a common network will also enable every store to use Denny’s new cloud-based POS system, she said.
That upgrade follows the rollout of an oven and other new cooking equipment to all Denny’s domestic stores. The new array enabled the chain to add such homestyle options as baked mac ‘n cheese and lasagna. Sales of the latter have been running at roughly double what the chain forecast following the product’s test, Valade said.
Verostek revealed that the franchisor had completed the equipment rollout despite problems in the supply chain by locking up all the devices available with one order and then selling them at no profit to franchisees.
The new menu made possible by the kitchen overhaul includes a number of what the chain calls Every Day Diner Deals, or selections intended to appeal to bargain-hunting customers. The value-oriented array accounted for 15% of sales during Q1, compared with a mix of 14% in the prior quarter, Valade said.
Without revealing many details, the CEO announced that her company will launch a program in 30 days that’s intended to improve the lives of “our operators,” a phrase that could apply to franchisees. Called Gain, it’s intended to provide participants with new skills and educational achievements. For instance, “coaches” will be available to help operators qualify for the equivalent of a high school diploma. Valade said.
For the first quarter ended March 29, profits totaled $600,000, a steep drop from the $21.9 million posted for the same period of the prior year. The company attributed the profit decline to accounting changes related to “de-designated interest rate hedges.”
Revenues grew 13.9%, to $117.5 million.
Valade’s became CEO of Denny’s in June 2022.
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