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Another restaurant chain that’s been the backbone of America's family dining scene for over 70 years is facing closures. According to Restaurant Business, Denny's is set to shutter roughly 150 locations—half by the end of 2024—as part of a strategy to improve its overall business.
The 71-year-old diner chain, known for its 24/7 service, is set to close 150 locations by the end of 2025. The announcement came during an investor call on October 22, 2024, where management revealed that the closures target underperforming restaurants that are dragging down the company's financial performance. CEO Kelli Valade stated, "We believe this is absolutely the right thing to do to make our system stronger."
Valade pointed out that these closures target the brand's "Achilles heel" restaurants—those holding back the rest of the chain from hitting its full potential. The CEO explained the closures are essential for Denny's long-term goals, which include raising the average annual sales per location to $2.2 million and giving the brand a fresh look. Following a 0.1% dip in same-store sales for the third quarter and the closure of 18 franchise units, Denny's now has 53 fewer locations than last year.
Denny's chief global development officer, Stephen Dunn added that "some of these restaurants can be very old," or situated in markets where consumer traffic has drastically shifted. He mentioned that the pandemic hit family dining hard, permanently altering dining habits, and Denny's is no exception.
While Denny's didn't specify the exact locations of the closures during the call, the 150 restaurants represent about 10% of the company's total portfolio. The closures will happen in waves. Fifty restaurants are set to close by the end of 2024, with the remaining 100 following suit by the end of 2025. By the time the closures are completed, Denny's will have around 1,375 restaurants left.
In addition to closures, Denny's is changing its signature 24/7 operating model. Valade revealed that about 25% of Denny's locations no longer operate around the clock, and the company may abandon its pre-pandemic goal of having every restaurant open 24/7.
The company will also trim down the menu to 46 from 97. Management noticed that more adults, looking to cut costs, were turning to the kid's menu to save money.
In the meantime, the company is focusing on revamping its image through Diner 2.0, an initiative aimed at modernizing many of its restaurants. As part of this program, Denny's is offering franchisees a $100,000 grant to update their locations, with the expectation that these upgrades will improve the look and boost sales.
According to Dunn, experience has shown that renovated stores tend to see a $400,000 increase in sales and a 6.5% rise in foot traffic. Participating franchisees will agree to pay slightly higher royalty fees in exchange for the grant.