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With Cash on Hand, Denny's Could Buy Another Concept

Denny’s is entering the final phase of its refranchising strategy, and could be buyers when it’s done.

During the third quarter, 56 stores were sold to franchisees, with an additional six planned for the fourth quarter. This brings the total to 110.

Denny’s expects to finish when it hits somewhere between 115-125 stores sold.

The deals brought $70 million in Q3 profit for Denny’s. Proceeds are expected to reach between $125 and $135 million.

This means Denny’s has cash on hand and might be willing to spend it. Investing some of it back into the brand is one clear choice, but the company is also considering the acquisition of another concept.

Denny’s will focus on strategies that enhance the brand, including menu development, convenience, and remodeling.

Same-store sales lifted 1.1 percent in Q3. Franchise locations saw a 1.2 percent increase, while company-owned stores dipped 0.2 percent.

Refranchising, isn’t the only strategy. The company opened 13 new franchises in Q3. At the end of period, Denny’s had 75 locations in development.

The brand is taking advantage of the increased cash flow to invest in the dining experience. Franchisees completed 31 remodels to Denny’s “Heritage” design during Q3, bringing the total refresh to 87 percent of the system.

Off-premises made up 11 percent of total sales during the third quarter.

Denny’s is also searching for new real estate to improve the quality of its portfolio.

Denny’s is increasing brand awareness to attract younger guests. Off-premises made up 11 percent of total sales in Q3. Delivery remains the big driver.

The sales segment is up from 7 percent when Denny’s On-Demand launched in mid-2017.

Integrated technology that doesn’t need multiple devices to run on is the future of Denny’s off-premises strategy. The less complicated the process is, the less likely a customer will end up with a wrong order or where an order gets lost completely.

2019 FSR Magazine.

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