This Breakfast Chain Is Slowly Shrinking

Denny's was once a stop for the perfect breakfast combo of pancakes, eggs, bacon, sausage, and hash browns known as the Grand Slam. But all the latest developments from this once mighty restaurant chain indicate it could be dying a slow death in the American marketplace.

In its most recent earnings release, Denny's leadership reported the closure of 57 locations in 2023. This accounted for a net decrease of 29 units, and Denny's anticipates 10 to 20 net closures in 2024. Back in 2017, Denny's had its highest number of restaurant locations, 1,735, but the chain's footprint has shrunk every year since then, down to its low point of 1,573 locations in 2023.

Same-store sales growth has also been abysmal for the brand in recent years. In 2023, Denny's same store sales growth was a modest 3.6%, but the brand predicts an increase of 0%–3% in 2024. Denny's chief financial officer Robert Verostek also said on the most recent earnings call that foot traffic decreased 6% in the fourth quarter of 2023 compared to the same period the previous year.

Denny's has made many attempts to improve its business in recent years, though seemingly none of these efforts have led to meaningful turnaround. Last year it released an augmented reality menu to celebrate the 70th anniversary of its Grand Slam breakfast combo. This modern approach was intended to "bring the brand to life through a memorable and mouth-watering journey as part of the dining experience," according to the press release.

Last summer, Denny's made changes to its loyalty program in the hopes of attracting more dedicated customers, reported Restaurant Dive. Like many other restaurant rewards programs, it "gamifies" the experience of dining at Denny's by creating new challenges for customers to unlock with repeat visits and specific purchases.

Denny's has also invested plenty in its virtual restaurants since 2021, debuting both The Burger Den and The Meltdown. These digital-only brands have earned Denny's about $1,000 per store, per week in same-store sales; that figure has not increased much since the second quarter of 2021.

There have been other attempts to hold on to Denny's customers, too, such as maintaining a 24/7 business model that draws in a broader array of diner demographics. And a 2022 hiring initiative involved encouraging prospective employees to bring their bestie to work so they could join the Denny's team together.

One possible beacon of hope for Denny's future comes in the form of restaurants that are not under the Denny's brand. The company acquired Keke's Breakfast Cafe, a breakfast and lunch restaurant concept, in 2022, and Restaurant Business reports that Denny's plans to expand the brand after a successful opening in Tennessee. Keke's features a different design and a distinct menu, and some locations even serve alcoholic beverages. Denny's CEO ​​Kelli Valade noted to Restaurant Business that 14 agreements have been signed for additional Keke's cafes, and four company-operated locations are currently under construction.

In addition to its 10-20 net closures in 2024, Denny's also anticipates the opening of roughly 30 new restaurants, and those new locations stand to generate higher sales volumes than the ones being shuttered. Maybe Denny's will find its equilibrium soon, and until then it can rely on Keke's, its better half.