Denny’s Corporation (DENN), America’s largest full-service family restaurant chain, recently announced the opening of its 1600th restaurant in the United States. The new restaurant is in Sioux Falls, South Dakota. This new unit is a Flying J conversion owned by franchisee Ken Herslip of LaMore Restaurant Group, LLC. With the opening of this restaurant, Denny’s has crossed a significant milestone and achieved the top notch in terms of locations in the family-restaurant segment.
The company’s recent unit growth is the result of an ongoing multi-year transformation program at Denny’s to re-energize the brand name and augment business performance. Denny’s is focused on a franchise-driven operating model and its Franchise Growth Initiative continues to transition company-owned stores to franchisees and spur additional unit growth.
Additionally, the company’s previously announced partnership with Pilot/Flying J Travel Centers is also accelerating the pace of unit growth. Under this partnership, Denny’s plans to open units in 50 locations over three years and convert up to 140 Flying J Travel Centers, to new Denny’s units early next year. Among these, conversion of 80 units is slated for this year.
Denny’s is also pursuing opportunities on university campuses across the country. Based on guests and partner acceptance, management targets opening three more campus locations this year apart from the sites that were rolled out at Cal State, San Bernardino, in the first quarter, in partnership with Sodexo.
Most of the company’s peers such as Buffalo Wild Wings Inc. (BWLD), BJ’s Restaurants Inc. (BJRI), California Pizza Kitchen Inc. (CPKI) and Red Robin Gourmet Burgers Inc. (RRGB) are on a modest expansion mode this year.
Spartanburg-based Denny’s delivered a disappointing second-quarter in terms of earnings, revenues and same-store sales. However, the company is trying to turn around with its expansion plan and various strategic initiatives. This month Denny’s appointed Robert Rodriguez as the Chief Operating Officer. Rodriguez’ vast knowledge in dealing with franchise concepts is expected to steer Denny’s through this difficult period.
Currently, we have a Zacks #3 Rank (short-term Hold recommendation) on the shares. We also reiterate our long-term Neutral rating.
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