Denny’s Accelerates Closure Plans, Shutters More Locations
Introduction:
Denny’s Corporation, a renowned diner chain with over 1,300 locations across the United States, announced this week that it is expanding its restaurant closure plans. The company’s initial announcement in October 2023 outlined a strategy to close 150 underperforming stores by the end of 2025. However, recent developments indicate that this number will be significantly higher.
Expanded Closure Plan:
In a Wednesday investors’ call, Denny’s chief financial officer, Robert Verostek, disclosed that the company now intends to shut down an additional 20 to 40 restaurants beyond the original estimate. This brings the total number of planned closures to a range of 70 to 90 in 2025. Combined with the 88 locations that have already closed in 2024, the total number of closures may reach 178.
Factors Behind Closures:
Denny’s executives cited various factors contributing to the accelerated closure plan. Some of the affected locations are nearing the end of their lease agreements or are housed in aging buildings that are no longer suitable for remodeling. Additionally, certain restaurants have struggled to generate sufficient profits.
Age of Locations:
Denny’s executive vice president and chief global development officer, Stephen Dunn, emphasized the age of many of the restaurants slated for closure. "Some of these restaurants can be very old," Dunn said. "When you think of a 70-year-old plus brand, you have a lot of restaurants that have been out there for a very long time."
Shift in Trade Areas:
Verostek also pointed out that the restaurant industry has evolved over time, resulting in shifts in trade areas. "In any mature brand, when restaurants have been open that long, it is natural that trade areas can shift over time," he said.
Financial Impact and Reinvestment:
Denny’s believes that accelerating the closure of underperforming restaurants will improve franchisee cash flow. These funds can then be reinvested into strategic initiatives aimed at driving traffic to remaining locations, such as the company’s proven remodel program.
Offset with New Openings:
While Denny’s is closing a significant number of restaurants, it plans to offset these losses with the opening of approximately 25 to 40 new locations in 2025. Half of these will be traditional Denny’s restaurants, while the other half will be Keke’s Breakfast Cafes, which Denny’s acquired in 2022.
Geographic Distribution:
The company has not yet released a list of specific locations that will be closed. However, Denny’s has a large concentration of stores in California, Florida, and Texas.
Lack of Advance Notice:
Denny’s stated that it does not provide advance notice of closures but works closely with owners and teams when a restaurant must close. The company’s website lists 1,323 U.S. locations as of Friday.
Conclusion:
Denny’s expanded closure plan is a strategic move to improve the company’s overall financial performance. By addressing underperforming locations and reinvesting in growth initiatives, Denny’s aims to enhance its franchisee profitability and bolster its long-term success.
