Coming off a 1.7% rise in same-store sales for the fourth quarter, Denny’s intends to stay in positive territory through the textbook moves of increasing staff training, emphasizing delivery and takeout and refreshing its menu and restaurants. But that’s where the standard playbook gets shut and shelved.
The family-dining chain doesn’t intend to follow the full-service charge into a catering, a market Denny’s might have trouble penetrating because of its image as a breakfast specialist whose menu is largely composed of a.m. staples, CEO John Miller explained to investors Tuesday. Barbecue or sandwiches work well in volume shipments to offices or homes, but “that's not the kind of thing you see with eggs, pancakes or even burgers, where the bottom bun gets soggy,” Miller said.
Denny’s is more likely to aim for that big-order market through family packs, he added.
Nor is the 1,703-unit chain following the usual formula of renovating the system and waiting another five or seven years for the next face-lift. Thirty-four restaurants had already been renovated by the end of 2019 with a new exterior and interior design package called Heritage 2.0, even though 11% of domestic units had yet to complete the earlier systemwide redo, Heritage 1.0. Both rehabs tend to deliver a mid-single-digit sales lift, primarily from an increase in transactions, with much of that additional traffic coming at dinner, Miller said. Both generations of the reimaging cost between $150,000 to $300,000 per store, he added.
Miller was more reserved in gauging the prospects for plant-based menu items than some of his peers at other chains have been. Denny’s recently added an Impossible-branded burger to its menu after testing it in California, and “it’s doing well,” Miller said. But “we had a very conservative estimate on it.”
“We get asked this question all the time: ‘Is this a trend long-term?’” Miller continued. “My sense of it is, whatever it is, it'll be around for a while.” Still, “people are critical of the fact that it may not be really better for you [because of] high sodium and the processes that are required to get there.”
He predicted that consumers would likely see plant-based versions of bacon, eggs, fish and chicken before the trend might lose its forward momentum.
Yesterday’s conference call was Denny’s first since reshuffling its top management last week. In that adjustment, Miller delegated his president’s duties to former CFO Mark Wolfinger, who was succeeded as finance chief by Robert Verostek. John Dillon, formerly CMO, was promoted to chief brand officer and EVP.
“Freeing John from a number of administrative responsibilities will enable him to purpose on extending our brand revitalization strategies through his ongoing visionary leadership,” Wolfinger told financial analysts.
The team repeated its now-standard heads-up that Denny’s is exploring possible uses for its excess cash, including acquisitions.
The company reported a net income for the fourth quarter of $18.6 million, a 61.3% increase from the year-ago quarter, on revenues of $113.8 million, down 28.7% from the prior period. The figures reflect the sale of 105 formerly company-operated restaurants to franchisees in 2019. More than 96% of the chain is now franchised.