Denny’s is hoping a new value deal will help reverse a sharp sales decline to start the year.
In April, the diner chain launched a buy one, get one (BOGO) promotion on its signature Slam menu. Customers can order a Grand Slam or All-American Slam breakfast and get a second one for $1.
It came after same-store sales fell 3% in the quarter ended March 26, marking Denny’s worst performance in four years. Executives blamed the “choppy” quarter on a troubled consumer.
“Consumer sentiment has been shaken” by concerns about tariffs, inflation and the job market, CFO Robert Verostek said during an earnings call Monday, echoing comments from other restaurant executives in recent weeks.
But the new BOGO deal has apparently helped calm their nerves. Nearly 70% of customers who ordered it were either new or lapsed, and that helped raise Denny’s same-store sales to flat in April.
About 4% to 5% of customers are ordering it, and it has boosted traffic across all income levels, executives said. It is driving enough traffic to offset the deep discount it offers.
“We've been very pleased with this promotion and know that it's critical to our guests that really need compelling value offers during this time of uncertainty,” said CEO Kelli Valade.
Denny’s already has an everyday value offer on the menu with its $2 $4 $6 $8 meal that launched last summer. But after analyzing feedback from customers and franchisees, it believed it needed something more compelling.
“We pulled it through because we could see that given the choppy environment and the competitor activity around value, we needed to come in with something a bit stronger,” Valade said.
The BOGO is a limited-time promotion that the chain will “pulse in” from time to time when needed, she added.
Still, given the ongoing economic uncertainty, Denny’s is expecting same-store sales for the year to come in at negative 2% to positive 1%, the lower end of its range.
The 1,491-unit chain is in the midst of a turnaround effort under Valade that involves refreshing the brand and boosting average unit volumes. But those plans hit a snag to start the year. In February, Denny’s announced plans to close up to 90 underperforming restaurants this year, 30 more than it had previously expected.
It has also battled skyrocketing prices for a key ingredient, eggs. The cost of eggs tripled or quadrupled to start the year, prompting some Denny’s restaurants to add an egg surcharge.
Fortunately, executives said the extra charge did not affect customer satisfaction scores, which actually increased by over 8 points in the first quarter, to 60.
Egg prices have since come down, and though Denny’s is still paying about two times as much for eggs, it expects the price to continue falling through the summer and into fall. Egg surcharges should be removed at most or all of its restaurants by the end of this month.
One bright spot in the quarter came from Keke’s Breakfast Cafe, the 72-unit daytime-dining chain Denny’s acquired in 2022.
Same-store sales at Keke’s rose 3.9%, thanks to a focus on operations as well as new menu offers, marketing initiatives and off-premise growth.
Keke's also opened three new restaurants in the quarter, including its first in Georgia, and is on track to open a total of 12 to 20 locations this year.
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