Diner-style restaurant chain Denny's has announced that it is closing 150 of its lowest-performing restaurants in the United States in an effort to turn around the brand's flagging sales.
About half of the closures will happen this year and the rest in 2025, the company said during a meeting with investors, with the goal of strengthening the company's financial performance and better prepare for future growth. The locations weren't revealed, but the restaurants represent around 10 percent of Denny's total. (Related: Rising costs, shrinking consumer spending and changing customer habits push more restaurants into bankruptcy.)
Stephen Dunn, Denny's executive vice president and chief global development officer, said some restaurants are no longer in good locations.
"Some of these restaurants can be very old," Dunn said during the investor meeting announcing the store closures. "You think of a 70-year-old plus brand. We have a lot of restaurants that have been out there for a very long time."
"It's never easy to close restaurants. It's a challenge, and you work with external factors, landlords and the like, and of course, you're dealing with people's lives," added Dunn during the call. "But we've realized that closing underperforming restaurants is strategically advantageous to a number of our franchisees, as it strengthens the bottom line cash flow for the long term."
Despite plans to open 30 to 40 new restaurants – including 12 to 16 of its sister brand Keke's Breakfast Cafe locations – the company anticipates a net decline of 45 to 55 restaurants, according to a press release.
Dunn emphasized the importance of optimizing the company's restaurant portfolio.
"We've made significant progress toward this goal, and this cleans up our portfolio and prepares us truly for growth," Dunn noted. While specific locations were not disclosed, the closures are expected to be completed by the end of 2025.
Changing customer habits, decreasing location profits affecting Denny's operations
The closures focus on the bottom quintile of restaurants, which have seen significant traffic shifts and changes in consumer behavior, particularly since the pandemic. Analysts note that restaurant price inflation has outpaced grocery price inflation, making it harder for customers to justify eating out – and when they do choose to head to a restaurant, customers prefer fast-casual and fast food chains. Denny's noted that its family dining style has lost the most customer traffic among many other subsectors in the restaurant industry since 2020.
In addition to closing select locations, Denny's has reevaluated its commitment to 24/7 operations at some restaurants.
"We really did sit down with our franchisees, and we've done profitability analysis. We've done everything we can to really understand the profitability and the foot traffic in those dinner and late-night hours," CEO Kelli Valade said.
She added that about 75 percent of Denny's restaurants currently operate around the clock. However, she noted that shifts in consumer behavior and decreased foot traffic during late-night hours have led some franchisees to reduce their operating hours.
"It's a contraction that happened for everyone," Valade said, acknowledging industry-wide changes post-pandemic. She added the company is constantly working with owners to see if there are opportunities to return to 24/7 operations at locations that have not yet returned to that model.
Despite the closures and operational adjustments, the company is aiming to modernize existing restaurants with a fresh, updated look both inside and out. The remodels have been tested in more than 35 restaurants, showing promising results in sales and traffic, officials said.
"We are very confident that this will have a major positive impact on the system," Dunn stated. "We're very proud about that and looking to get this more actively engaged with our franchisees on a daily basis."
Denny's has introduced financial support programs, including a remodel loan pool and an acceleration program to facilitate access to capital to be able to assist franchisees with the remodels.
Visit Bubble.news for more on the many businesses shutting down or trimming operations due to the flagging economy.
Watch this video about Denny's closing down many of its locations, with more to be shuttered down the road.
This video is from the EconomicEdge.com channel on Brighteon.com.
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