Dive Brief:
- Denny’s plans to accelerate its closure of lower-volume restaurants this year, with between 70 and 90 expected to shutter, CFO Robert Verostek said during a Wednesday earnings call. This contraction includes some closures related to lease expirations.
- The chain closed 88 restaurants last year, including 30 during the fourth quarter. These units had average unit volumes below $1.1 million and had been open for an average of about 30 years.
- Denny’s previously said it planned to close 150 underperforming restaurants by the end of 2025. The new closure forecast means nearly 30 additional restaurants have been marked to shut down. Verostek also said the chain reduced headcount at corporate support centers, but did not provide further details.
Dive Insight:
Denny’s is still opening new restaurants, with the addition of 14 new locations last year, including four during the fourth quarter, Verostek said. Denny’s expects to open roughly 20 restaurants this year, he said.
Denny’s ended 2024 with 1,334 restaurants, with about 745 of its stores in the U.S.More than half of its domestic store count is located in California, Texas, Florida and Arizona, per an earnings presentation.
The store closure plan came after the chain assessed 265 of its worst-performing restaurants; Denny’s intends to rehabilitate those locations not scheduled for closure. Many of these restaurants saw a decline in traffic as customers began favoring QSRs, executives previously said during the chain’s October investor day.
“When restaurants have been open that long, it is natural that trade areas can shift over time,” Verostek said on the earnings call. “Accelerating the closure of lower volume restaurants will improve franchisee cash flow and allow them to reinvest into traffic driving initiatives like our tested and proven remodel program.”
Denny's domestic same-store sales
Denny’s completed 23 remodels, including seven company-owned restaurants, last year. Remodels typically result in a 6.4% sales lift and 6.5% traffic lift, and tend to require an average investment of roughly $250,000, according to a company earnings presentation.
“This program is a catalyst for increasing same-restaurant sales, generating incremental traffic and driving profitability to our system and is a key component of achieving our long-term goal of $2.2 million AUVs for the Denny’s brand,” CEO Kelli Valade said during the Wednesday call.
Fourth-quarter systemwide same-store sales were up 1.1%, while full-year comparable sales were down 0.2%, according to an earnings release. Domestic franchised stores reported a same-store sales lift of 1.2% compared to flat comps at company-owned locations, Verostek said. The company expects domestic comparable sales to be between negative 2% and positive 1% for 2025.
