In a strategic pivot, Denny’s Corporation has announced the closure of 150 Denny’s restaurant locations by the end of 2025. This decision comes as the company reassesses its domestic operations, aiming to optimize its overall brand health. While some locations will shutter this year, others may undergo rehabilitation or acquisition by stronger operators. This move aligns with broader industry trends where restaurant chains are increasingly focusing on maximizing unit performance and efficiency.
Denny’s Corporation’s recent decision mirrors similar actions it has taken in the past when faced with changing market dynamics. Previously, the company had closed underperforming locations to focus on markets with higher growth potential. This pattern suggests a consistent strategy of realigning resources to enhance profitability and sustain market presence. The restaurant chain’s approach reflects a broader trend in the foodservice industry, where companies are adapting to shifts in consumer behavior and operational challenges.
What Are the Key Reasons Behind the Closures?
Chief Global Development Officer Steve Dunn highlighted that “traffic shifts” and “convenience shifts” significantly impacted the decision to close these locations. Some restaurants in the bottom quintile of performance were identified as aging and in need of updates. By addressing these concerns, Denny’s aims to boost the brand’s overall performance and ensure long-term sustainability.
How Will Denny’s Adjust Its Strategy Moving Forward?
Denny’s plans to counterbalance the closures by opening 30 to 40 new restaurant locations in 2024, with 12 to 16 of these openings being Keke’s Breakfast Cafe locations. The company anticipates a net decline of 45 to 55 units next year, indicating a strategic shift towards more profitable outlets. This adjustment is expected to result in increased average unit volumes and net unit growth.
The financial context of these changes is evident in Denny’s recent report of a $111.76 million operating revenue for the third quarter, marking a 2.1% decline from the previous year. Additionally, net income decreased to $6.52 million. These financial results underscore the need for the strategic realignment of the company’s operations. Adjusted earnings projections for the full year have been adjusted to $81–84 million, reflecting the company’s revised expectations.
Denny’s Corporation is not unique in its decision to close underperforming locations. Other chains like TGI Friday’s have recently announced similar closures, focusing on strengthening their profitable outlets. This indicates a wider industry trend of streamlining operations to maintain competitiveness in a challenging market environment.
As Denny’s Corporation undertakes this significant restructuring effort, the company’s focus remains on enhancing the overall strength and sustainability of its brands. By closing lower-volume locations and investing in higher-performing ones, Denny’s aims to better position itself for future growth. For consumers, these changes might translate into improved dining experiences and service at the remaining and newly opened locations.
