Dive Brief:
- Denny’s completed its $82.5 million acquisition of Keke’s Breakfast Cafe, which has 52 units across Florida, the company announced Wednesday.
- Denny’s used cash on hand as well as funds from a revolving credit facility to purchase the chain.
- Keke’s will operate independently from Denny’s and maintain its own leadership, strategies, products, marketing, operations and development initiatives.
Dive Insight:
Denny’s acquisition of a complementary restaurant concept is expected to provide expansion opportunities, Denny’s CEO Kelli Valade said in a statement.
“The A.M. Eatery segment is fast-growing and Keke’s is a brand with attractive unit economics and strong potential,” Valade said.
Average unit volumes at Keke’s 44 franchised and eight company-owned restaurants are about $1.9 million, Nation’s Restaurant News reports, and the chain’s price points are about 20% higher than Denny’s. The company appeals to high-income Gen Z and millennial consumers and families with kids.
Keke’s recorded same-store sales increases of 18% during 2021 versus 2019, Denny’s executives said during a May earnings call. As of May, same-store sales were up 12% year-to-date versus 2021. Adjusted EBITDA contribution is expected to be between $6.5 million and $7 million, executives said.
Breakfast concepts have done well in recent quarters. First Watch, for example, posted similarly robust same-store sales growth during Q1 2022, with same-restaurant sales increasing 27.2% and same-restaurant traffic increasing 21.9%, according to an earnings release. First Watch, which went public last year, aims to grow from over 420 units to 2,200.
Denny’s acquisition marks one of only a handful of restaurant-to-restaurant deals completed this year, which may reflect how capital is becoming more expensive. Dave & Buster’s completed its $835 million acquisition of Main Event in June.
