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Labor issues pose a different sort of capacity limit for Denny's

The diner chain is being stymied by difficulties in finding workers for off-hour shifts.
Photograph: Shutterstock

Personnel issues are forcing the Denny’s diner chain to curtail its service capacities beyond the dining-room shutdowns and seating limits imposed by state and local governments, officials revealed this week.

They explained that 70% of domestic units have yet to resume around-the-clock service, a traditional signature and strength of the diner brand. The hurdle has been finding employees who are willing to work the late and overnight shifts, CEO John Miller said. He did not say if the recruitment issues are the result of fears about exposure to the coronavirus, concerns about how much servers would make during the off-hours, or merely the logistical problems of fully restaffing the 1,035 domestic stores that now offer dine-in service.  

The officials cited the situation as another significant challenge in rebuilding the brand’s sales and traffic. Capacity, said Miller, is by far the core problem. He noted that California’s reclosure of restaurant dining rooms on July 13 forced 25% of the chain to shift back to 100% reliance on to-go business, which has generated average weekly sales of $7,900 per unit thus far in July. Same-store sales were down 41% for the first week of the month, and Miller quipped that “we never thought that I’d be excited about the 41%.”

He noted that comps were down 80% during the last week of March.

Other executives revealed that 47 domestic restaurants are temporarily closed, and 31 stores, all but one of them franchised, have permanently gone dark. “With increasing top line pressure, these restaurants unfortunately could not sustain in the current environment,” Denny’s President Mark Wolfinger said of the 31 permanently closed branches. “The pandemic's impact accelerated these closings as we had anticipated them closing in the next several years anyway due to lower sales volumes and continued inflationary pressures.”

Overall, Denny’s lost $23 million in the second quarter ended June 24, compared with a profit of $34.2 million for the year-ago period. Revenues dropped 54.9%, to $136.9 million.

But there were a number of positive developments during the quarter, Miller said. He noted that much of the growth in off-premise sales—a 100% jump from the first quarter—came from younger customers. Business from 18 to 24-year olds jumped 40%, while reveneus from customers aged 25 to 34 rose 9%.

“It's a younger audience that might have been otherwise hard to reach through typical forms of broadcast or media,” he said,  

He also noted that the weather in California has been temperate, which allowed franchisees there to set up outdoor dining areas.

Still, he commented, “This quarter has proven to be one of the most difficult quarters this country and especially the full-service restaurant industry has ever seen.”

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