Dive Brief:
- Denny’s struck a 250-unit partnership with virtual restaurant brand company Franklin Junction on Monday. Per the agreement, Franklin Junction will provide “geographic exclusivity ... to accelerate Denny’s market presence” through its host kitchen platform.
- Through the collaboration, Denny’s will “host new virtual concepts through their vast restaurant footprint,” Franklin Junction CEO Rishi Nigam said in a statement.
- Denny’s has been deepening its virtual brand investments over the past few years, expanding its Banda Burrito test ninefold in November. The chain also operates two additional virtual brands, The Melt Down and The Burger Den, which it debuted in 2021.
Dive Insight:
Denny’s agreement with Franklin Junction follows a 20-unit test by a Denny’s franchisee, in which the operator tested several virtual brands.
“We look to finalize an agreement with Franklin Junction over the next several months to expand this test,” CFO Robert Verostek said during Denny’s Q3 2023 earnings call. “If all goes well, [we’ll] roll it out more broadly to the entire system.”
Verostek said on the October call that dinner and late-night dayparts are primed for growing off-premise and virtual brand sales traffic. In Monday’s press release, Denny’s CEO Kelli Valade described the diner’s off-premise business as “a unique strength for Denny’s” that Franklin Junction can help advance. In Q3, the chain posted off-premise sales of 19%, though performance improved at the end of October to over 20%.
Virtual brand companies have struggled over the last year. In 2023, Nextbite cut staff and later sold to C3 CEO Sam Nazarian, while Red Robin shuttered its in-house virtual brands and ended its MrBeast Burger partnership. But some experts, including Nigam, feel that the virtual brand sector is merely experiencing growing pains.
“We’re in the second inning of a nine-inning ballgame,” Geoff Alexander, Wow Bao’s CEO and president, said of the virtual brand landscape in an interview last fall.
