7:00 pm - February 13, 2025
Denny’s, a well-known diner chain, has recently announced an increase in the number of restaurant closures, aiming to revitalize its growth strategy. Initially, the company planned to close 150 locations, but in 2024, it shuttered 88 restaurants and anticipates closing an additional 70 to 90 in 2025, bringing the total to approximately 180 closures. These decisions were influenced by several factors, including expiring leases, high remodeling costs for restaurants over 30 years old, and locations that have become unprofitable. This strategic move reflects the challenges faced by many mature brands as market dynamics evolve over time, impacting the viability of long-standing locations.
Robert Verostek, Denny’s CFO, emphasized that older restaurants in shifting trade areas often necessitate such closures. He noted that accelerating the closure of underperforming locations can enhance franchisee cash flow, enabling reinvestment in initiatives like remodels. In fact, remodels have proven successful, with a 6.5% increase in traffic observed in renovated locations. Despite this success, only 23 out of 1,300 locations were remodeled in 2024, highlighting the slow pace of this initiative. This modest number underscores the challenges Denny’s faces in implementing broader changes across its extensive network.
The broader context of the restaurant industry reveals that Denny’s is not alone in its struggles. The current economic climate, marked by inflation and rising food costs, has significantly impacted the company. Sales declined sharply in the first two months of 2025 following a strong end to 2024, attributed to consumer uncertainty. Verostek mentioned that this uncertainty, coupled with a recent inflation report showing a 0.5% increase in consumer prices, has led to volatility in February. As a result, Denny’s has adopted a conservative outlook for the year, reflecting the cautious approach many businesses are taking in these uncertain times.
The human impact of these closures is profound. Employees and customers alike are affected by the loss of these community staples. Each closure signifies not just a business decision but the end of a gathering place that may have served generations. The emotional toll on staff and regular patrons highlights the difficult balance companies must strike between financial sustainability and community presence. However, the strategy also opens opportunities for renewal. Remodeled locations can inject new life into neighborhoods, potentially attracting new customers and revitalizing the brand’s image.
Stock market reactions further illustrate the financial challenges Denny’s is facing. Shares dropped nearly 25% in a single day following the announcement, reflecting investor concerns about the company’s outlook. This significant decline, part of a 50% drop over the past year, underscores the broader loss of confidence in the market. The volatility in consumer spending and the increasing costs of operations have created a perfect storm that is challenging Denny’s ability to navigate the competitive landscape effectively.
Looking ahead, Denny’s strategy of targeted closures and strategic remodels is a calculated effort to position the company for future growth. While the immediate impact may be disheartening for many, the long-term vision involves a leaner, more profitable network of restaurants. By focusing resources on high-potential locations, Denny’s aims to revitalize its brand and reclaim its place in the hearts—and stomachs—of its customers. This approach, while painful in the short term, may pave the way for a more resilient and thriving business in the years to come.