Denny's diversifies with rollout of 2 virtual brands

Dive Brief:

Denny's will launch two virtual brands this year to help grow market share, Denny's CEO John Miller said during an ICR presentation on Monday. The first brand, The Burger Den, will focus on some of Denny's favorites and new signature items, and is expected to launch in February. Over half of the company’s domestic locations have already signed up to participate. The concept will be available on Postmates, DoorDash and Uber Eats.
The second brand, The Melt Down, will feature handcrafted sandwiches with fresh ingredients like sausage, pickles, turkey and bacon, Miller said. The concept was tested exclusively with DoorDash in 23 markets. About half of the company’s domestic locations have signed up to offer the brand beginning in the spring.
Several casual brands have been expanding via virtual brands within the last year with Brinker's It's Just Wings, Applebee's Neighborhood Wings and Bloomin' Brands' Tender Shack as a way to diversify their portfolios and grow revenue.

Dive Insight:

While many casual chains have been creating brands based on chicken or chicken wings, Denny's is taking a different approach, focusing on popular menu items. The Burger Den concept will allow the chain to focus on its burgers and test new varieties, Miller said.

These brands could also help the company grow market share and recover some of its lost sales. Same-store sales, which were beginning to recover in September through November in the mid-to-upper 20% range, dipped down to 41% in December, according to preliminary financial results. This is still an improvement from April, when same-store sales dropped 76%.

"We believe our overbuilt industry will suffer an unfortunate and meaningful rationalization of seats through the pandemic largely at the expense of independent and full-service operations. We do not celebrate this prediction, but we believe the brands that survive will have the opportunity to gain market share," Miller said.

Denny’s also has seen significant growth in its off-premise channels, more than doubling its weekly sales compared to pre-pandemic, when average weekly off-premise store sales were $4,000. The company implemented pickup parking signs to improve the curbside experience and also provided free delivery when customers ordered via its website or mobile app, Miller said, adding that free delivery offers have helped introduce new customers to the brand.