In this FDD Talk post, you’ll learn the following:
- Section I – Background information on the Denny’s franchise opportunity, including relevant news updates
- Section II – Estimated initial investment for a Denny’s franchise, based on Item 7 of the company’s 2019 FDD
- Section III – Initial franchise fee, royalty fee, marketing fee, and other fees for a Denny’s franchise, based on Items 5 and 6 of the company’s 2019 FDD
- Section IV – Number of franchised and company-owned Denny’s outlets at the start of the year and the end of the year for 2016, 2017, and 2018, based on Item 20 of the company’s 2019 FDD
- Section V – Presentation and analysis of Denny’s financial performance representations, based on Item 19 of the company’s 2019 FDD, including information on the:
- 2018 average net sales; food costs; crew labor; management labor; gross profit; taxes/fringe benefits; utilities; repairs and maintenance; other expenses; and EBITDA before royalties, advertising, occupancy cost, and management fees for the Top Third, Middle Third, and Bottom Third of the 169 Denny’s restaurants owned and operated by the company in the United States during the twelve-month period beginning December 28, 2017 and ending December 26, 2018, excluding only those restaurants which were open for only part of such period
- 2018 average sales for the 169 company-owned and 1,356 franchised Denny’s restaurants that were open the entire year
Section I – Background Information
19 Things You Need to Know About the Denny’s Franchise
Invites Customers to Experience Brand Revitalization with New Campaign
1. At the beginning of May 2019, Denny’s launched its nationwide “See You at Denny’s” campaign to invite consumers back to its restaurants to experience improvements the brand has brought to life. As part of its brand revitalization over the past few years, Denny’s remodeled over 80% of its restaurants to be more modern and comfortable and overhauled a large majority of its menu to meet shifting consumer tastes.
2. The new “See You at Denny’s” tagline is an invitation for customers to try out the new Denny’s, and with dedicated spots for multiple multicultural audiences, the campaign further solidifies Denny’s position as America’s Diner and its commitment to providing an inclusive and welcoming dining experience.
3. John Dillon, Denny’s chief brand officer, said, “In a coordinated effort with our franchise partners over the last several years, we’ve invested in higher quality ingredients, more comfortable dining spaces and maintained a focus on impactful diversity, equality and inclusion initiatives. We have long been the place where people come together. More than an ad campaign, ‘See You at Denny’s’ is a sign of our continued commitment across the organization to create a place where the modern American family can come together and connect over a delicious meal.”
4. To bring the “See You at Denny’s” campaign to life, Denny’s tapped agencies EP+Co, Conill, and Fluent360 to create several spots. The creative was inspired by the diverse demographics of Denny’s guests and captures the inclusive gatherings of families and friends Denny’s is known for across America.
5. The spots include dedicated commercials speaking directly to African-American and Hispanic guests. The advertisements will run on national TV as well as various digital and social platforms including Hulu, YouTube, Vevo, Facebook, and Instagram.
6. According to John Miller, Denny’s president and CEO, “The revitalization of Denny’s celebrates years of hard work from everyone in our organization to further strengthen our place as America’s Diner. With new training programs emphasizing our obsession with customer service, new technology like Denny’s on Demand allowing us to reach guests at their convenience and an unwavering commitment to feeding everyone delicious food, Denny’s continues to raise the bar to delight our customers. We can’t wait to see you.”
Partners with Magic Johnson for Breakthrough Leadership Training and Development Program
7. In mid-March 2019, Denny’s announced a partnership with Earvin “Magic” Johnson. With Johnson’s support, Denny’s has created an online and multifaceted experiential program to accompany their Breakthrough Leadership Training and Development Program. Denny’s focus is on creating and developing careers. Johnson’s history as a business leader, entrepreneur, athlete, and philanthropist, complements Denny’s commitment to building individuals and strong teams.
8. John Dillon, senior vice president and chief brand officer for Denny’s, said, “Partnering with Magic is such a natural fit for us. His business acumen and commitment to building diverse workforces aligns well with Denny’s efforts and our passion for supporting the communities we serve. Over the coming months, Denny’s looks forward to visiting several communities in which we will provide job opportunities and information about careers in the hospitality industry. Johnson’s assistance in our efforts will help us reach a broad audience to share skills and insights that will help them grow personally and professionally.”
9. Denny’s Breakthrough Leadership Training and Development program provides Denny’s team
members with exclusive access to numerous creative and interactive employee engagement curricula, leadership workshops, simulations, games, and mobile learning and educational training videos. Several elements of the training program are experiential and designed to be practical and sustainable, reflecting real business and leadership challenges that team leaders face every day. In April 2019, Denny’s launched a complementary recruiting site highlighting job and career-long opportunities.
10. According to Johnson, “Denny’s is doing this right. Having spent time with the senior leadership team and having witnessed firsthand their commitment to recruiting local talent, training their employees, and making a positive impact in their local communities, it’s obvious they are approaching their goals the right way. Magic Johnson Enterprises has always been focused on developing programs that create jobs and careers in the areas in which we invest. Over the coming months, I look forward to participating in Denny’s recruiting and training efforts and I am proud to support their team.”
11. Chris Bode, Denny’s chief operating officer, added, “Denny’s success and our ability to achieve breakthrough results is directly dependent upon the effectiveness of our leaders and team members. We believe there is a leader inside of everyone. We have had the pleasure of working with Magic Johnson and his Foundation for the past eight years, and we understand and support his commitment to youth and education. We are privileged to have this opportunity to continue working together to recruit and build a best-in-class workforce that will help us foster an environment and culture that will sustain our business for years to come.”
12. In addition to launching Denny’s new recruiting and leadership training program, Denny’s teamed up with Magic Johnson earlier in 2019 to develop a regional specialized menu in Southern California. These specialty items come with tips demonstrating healthy alternatives for classic meals.
13. Denny’s was founded as Danny’s Donuts in 1953 by Harold Butler and Richard Jezak in Lakewood, California. The Danny’s Donuts concept was a success, and within a few years there were a few locations around California. In 1955, Jezak left the company, leaving Butler as the chain’s sole operator. Around this time, Butler decided to change the concept of the growing business from a donut shop into a coffee shop that stayed open for 24 hours.
14. In 1959, Butler changed the name from Danny’s Coffee Shops to Denny’s Coffee Shops to avoid confusion with Los Angeles chain Coffee Dan’s. A few years later the “Coffee Shops” part of the brand’s name was dropped and Denny’s has stuck since 1961.
15. Over the next few decades, Denny’s continued to grow across the United States. It introduced its signature Grand Slam breakfast in 1977. By 1981, Denny’s had grown to 1,000 locations around the United States.
16. In 1987, Denny’s was acquired by Trans World Corporation (TW Corporation), and the company’s headquarters was moved from Irvine, California to Spartanburg, South Carolina in the early 1990s. In 1992, private equity firm Kohlberg Kravis Roberts acquired a 47% interest in TW Corporation, later known as The Flagstar Companies, and encouraged the company to sell non-core businesses. Operation of Denny’s became the core business of The Flagstar Companies that it ended up changing its name to Denny’s Corporation.
17. In 1994, as Denny’s continued to expand, the company began renovating its stores. Denny’s
growth continued into the next two decades and in 2010, Denny’s experienced a major expansion when the company partnered with Pilot Flying J to open restaurants inside Flying J-branded truck stop locations.
18. Today, there are Denny’s restaurants in all 50 U.S. states, Puerto Rico, Guam, Chile, Canada, Mexico, Costa Rica, New Zealand, and many other countries.
Entrepreneur’s Franchise 500
19. Denny’s did not rank on Entrepreneur’s 2019 Franchise 500 list.
Section II – Estimated Costs
- Please click here for detailed estimates of Denny’s franchise costs, based on Item 7 of the company’s 2019 FDD.
Section III – Initial Franchise Fee, Royalty Fee, Marketing Fee, and Other Fees
- Please click here for detailed information on Denny’s initial franchise fee, royalty fee, marketing fee, and other fees, based on Items 5 and 6 of the company’s 2019 FDD.
Section IV – Number of Franchised and Company-Owned Outlets
- Outlets at the Start of the Year: 1,435
- Outlets at the End of the Year: 1,441
- Net Change: +6
- Outlets at the Start of the Year: 1,441
- Outlets at the End of the Year: 1,429
- Net Change: -12
- Outlets at the Start of the Year: 1,429
- Outlets at the End of the Year: 1,405
- Net Change: -24
- Outlets at the Start of the Year: 164
- Outlets at the End of the Year: 169
- Net Change: +5
- Outlets at the Start of the Year: 169
- Outlets at the End of the Year: 178
- Net Change: +9
- Outlets at the Start of the Year: 178
- Outlets at the End of the Year: 173
- Net Change: -5
Section V – Financial Performance Representations (Item 19, 2019 FDD) and Analysis
Part 1 – Operating Performance of Denny’s Company-Owned Restaurants
- This section presents the actual operating results with respect to sales and selected costs of 169 Denny’s restaurants owned and operated by the company in the United States during the twelve-month period beginning December 28, 2017 and ending December 26, 2018, excluding only those restaurants which were open for only part of such period.
- The three tiers are comprised of 56 Denny’s restaurants in the top and middle tiers and 57 in the bottom tier.
- The schedule is based upon data received from Denny’s employees at each restaurant who, in the normal course of business, collect such data.
- Net sales represent all revenue derived from the restaurants, including all sales of food, goods, wares, merchandise, and all services made in, upon, or from the restaurants, including catering services, whether for cash, check, credit, or otherwise, without reserve or deduction for inability to collect the same.
- Net sales do not include rebates or refunds to customers or the amount of any sales taxes or other similar taxes that restaurants may be required to collect from customers to be paid to any federal, state, or local taxing authority.
- Denny’s is not able to provide similar information relating to Denny’s restaurants operated by franchisees because the company does not have reliable information relating to costs incurred by franchise operators.
- However, during the same period (a twelve-month period beginning December 28, 2017 and ending December 26, 2018), the average Net Sales of all Denny’s restaurants (including both franchised restaurants and restaurants owned and operated by the company) was $1,692,000. This figure excludes any restaurant that was open for only part of such period.
- The restaurants included in this section have been open for periods as short as one year and as long as 60 years. No restaurant has been open for less than twelve months.
- All dollar figures are in thousands.
Top Third (56 Restaurants)