Denny’s Corporation (the "Company") (NASDAQ: DENN), owner and operator of Denny's Inc. ("Denny's") and Keke's Inc. ("Keke's") today reported results for its third quarter ended September 25, 2024 and provided a business update on the Company’s operations.

Kelli Valade, Chief Executive Officer, stated, “Our third quarter sales results directly reflect ongoing brand investments and dedicated focus on value that resulted in outpacing the category. Denny’s domestic system-wide same-restaurant sales** outperformed the BBI Family Dining index for the third consecutive quarter driven by the relaunch of our fan favorite $2-$4-$6-$8 value menu and the continued expansion of off-premises with our third virtual brand, Banda Burrito. Keke’s also experienced significant sequential improvement in same-restaurant sales** as our initiatives to enact foundational marketing strategies and expand the alcohol program continued our efforts to close the gap to the competitive set. We are also very excited to be hosting an Investor Day today.”

Beginning at 9:00am EST this morning, the Company will be hosting an Investor Day in New York, as well as a live webcast, to detail strategic initiatives to build on its third quarter progress and ensure long-term financial opportunities for its brands. The investor day will highlight the Company’s plan to grow average unit volume sales, margins and the portfolio, while balancing capital allocations to maximize shareholder returns.

Third Quarter 2024 Highlights(1)

  • Total operating revenue was $111.8 million compared to $114.2 million for the prior year quarter.
  • Denny's domestic system-wide same-restaurant sales** were (0.1%) compared to the equivalent fiscal period in 2023, including (0.1%) at domestic franchised restaurants and (0.4%) at company restaurants.
  • Opened two Denny's domestic franchised restaurants.
  • Completed six Denny's remodels, including three company remodels.
  • Operating income was $11.7 million compared to $14.0 million for the prior year quarter.
  • Adjusted franchise operating margin* was $30.1 million, or 51.0% of franchise and license revenue, and Adjusted company restaurant operating margin* was $6.2 million, or 11.8% of company restaurant sales.
  • Net income was $6.5 million, or $0.12 per diluted share.
  • Adjusted net income* and adjusted net income per share* were $7.2 million and $0.14, respectively.
  • Adjusted EBITDA* was $20.0 million.

(1) Beginning fiscal 2024, the Company has evolved its definition of non-GAAP measures. Please see the definitions, explanations, and reconciliations further in this release.

Third Quarter 2024 Results

Total operating revenue was $111.8 million compared to $114.2 million for the prior year quarter.

Franchise and license revenue was $59.1 million compared to $61.0 million for the prior year quarter. This change was primarily driven by a decrease in initial and other fees associated with the sale of kitchen equipment in the prior year quarter, and decreases in equivalent units and franchise occupancy revenue, partially offset by an increase in franchise advertising revenue primarily related to higher local advertising co-op contributions for the current quarter.

Company restaurant sales were $52.7 million compared to $53.2 million for the prior year quarter primarily driven by four fewer Denny's equivalent units, including three refranchised units, partially offset by three additional Keke's equivalent units for the current quarter.

Adjusted franchise operating margin* was $30.1 million, or 51.0% of franchise and license revenue, compared to $31.1 million, or 51.0% for the prior year quarter. This margin change was primarily driven by the impact of fewer equivalent units on royalty revenues and lease terminations.

Adjusted company restaurant operating margin* was $6.2 million, or 11.8% of company restaurant sales, compared to $7.6 million, or 14.3% for the prior year quarter. This margin change was primarily due to investments in marketing and higher occupancy costs, including general liability insurance costs, for the current quarter.

Total general and administrative expenses were $19.8 million compared to $18.2 million in the prior year quarter. This change was primarily due to an increase in corporate administration expense.

The provision for income taxes was $1.5 million, reflecting an effective tax rate of 18.5% for the current quarter.

Net income was $6.5 million, or $0.12 per diluted share. Adjusted net income* per share was $0.14.

The Company ended the quarter with $272.0 million of total debt outstanding, including $261.0 million of borrowings under its credit facility.

Capital Allocation

The Company invested $7.8 million in cash capital expenditures, which included Keke's new development and Denny's company remodels.

During the quarter, the Company allocated $1.8 million to share repurchases resulting in approximately $89.2 million remaining under its existing repurchase authorization.

Business Outlook

The following full year 2024 expectations reflect management's expectations that the current consumer and economic environment will not change materially, as well as the Company's strategic initiative to accelerate the closure of lower volume Denny's restaurants.

  • Denny's domestic system-wide same-restaurant sales** between (1%) and 0% (vs. between (1%) and 1%).
  • Consolidated restaurant openings of 30 to 40, including 12 to 16 new Keke's restaurants, with a consolidated net decline of 45 to 55 (vs. 20 to 30).
  • Commodity inflation of approximately 2% (vs. between 0% and 2%).
  • Labor inflation between 3% and 4%.
  • Total general and administrative expenses between $82 million and $85 million, including approximately $11 million related to share-based compensation expense which does not impact Adjusted EBITDA*.
  • Adjusted EBITDA* between $81 million and $84 million (vs. between $83 million and $87 million).
Please refer to the Reconciliation of Net Income to Non-GAAP Financial Measures, as well as the Reconciliation of Operating Income to Non-GAAP Financial Measures included in the tables below. The Company is not able to reconcile the forward-looking non-GAAP estimate set forth above to its most directly comparable U.S. generally accepted accounting principles (GAAP) estimates without unreasonable efforts because it is unable to predict, forecast or determine the probable significance of the items impacting these estimates, including gains, losses and other charges, with a reasonable degree of accuracy. Accordingly, the most directly comparable forward-looking GAAP estimate is not provided.
   
** Same-restaurant sales include sales at company restaurants and non-consolidated franchised and licensed restaurants that were open during the comparable periods noted. Total operating revenue is limited to company restaurant sales and royalties, advertising revenue, initial and other fees and occupancy revenue from non-consolidated franchised and licensed restaurants. Accordingly, domestic franchise same-restaurant sales and domestic system-wide same-restaurant sales should be considered as a supplement to, not a substitute for, the Company's results as reported under GAAP.
   

Conference Call and Webcast Information

The Company will provide further commentary on the results for the third quarter ended September 25, 2024 and its investor day on a webcast today, Tuesday, October 22, 2024 at 9:00 a.m. Eastern Time. Interested parties are invited to listen to the webcast accessible through the Company's investor relations website at investor.dennys.com.

About Denny's Corporation

Denny’s Corporation is one of America’s largest full-service restaurant chains based on number of restaurants. As of September 25, 2024, the Company consisted of 1,586 restaurants, 1,514 of which were franchised and licensed restaurants and 72 of which were company operated.

The Company consists of the Denny’s brand and the Keke’s brand. As of September 25, 2024, the Denny's brand consisted of 1,525 global restaurants, 1,464 of which were franchised and licensed restaurants and 61 of which were company operated. As of September 25, 2024, the Keke's brand consisted of 61 restaurants, 50 of which were franchised restaurants and 11 of which were company operated.

For further information on Denny's Corporation, including news releases, links to SEC filings, and other financial information, please visit investor.dennys.com.

Non-GAAP Definition Changes

The Company has evolved its definition of non-GAAP financial measures starting in fiscal 2024 to provide more clarity and comparability relative to peers. Denny's Corporation management uses certain non-GAAP measures in analyzing operating performance and believes that the presentation of these measures provides investors and analysts with information that is beneficial to gaining an understanding of the Company's financial results. Non-GAAP disclosures should not be viewed as a substitute for financial results determined in accordance with GAAP.

The Company excludes legal settlement expenses, pre-opening expenses, and other items management does not consider in the evaluation of its ongoing core operating performance from adjusted operating margin*, adjusted net income*, adjusted net income per share*, and adjusted EBITDA*. In addition, the Company no longer deducts cash payments for restructuring and exit costs, or cash payments for share-based compensation from Adjusted EBITDA*. Lastly, the Company has transitioned to utilizing GAAP cash flows included in its SEC filed documents in lieu of a non-GAAP financial measure.

Reconciliations of these non-GAAP measures are included in the tables of this press release and a recast of historical non-GAAP financial measures can be found on the Company's website, or its most recent investor presentation.

 

Cautionary Language Regarding Forward-Looking Statements

The Company urges caution in considering its current trends and any outlook on earnings disclosed in this press release. In addition, certain matters discussed in this release may constitute forward-looking statements. These forward-looking statements, which reflect management's best judgment based on factors currently known, are intended to speak only as of the date such statements are made and involve risks, uncertainties, and other factors that may cause the actual performance of Denny’s Corporation, its subsidiaries, and underlying restaurants to be materially different from the performance indicated or implied by such statements. Words such as “expect”, “anticipate”, “believe”, “intend”, “plan”, “hope”, "will", and variations of such words and similar expressions are intended to identify such forward-looking statements. Except as may be required by law, the Company expressly disclaims any obligation to update these forward-looking statements to reflect events or circumstances after the date of this release or to reflect the occurrence of unanticipated events. Factors that could cause actual performance to differ materially from the performance indicated by these forward-looking statements include, among others: economic, public health and political conditions that impact consumer confidence and spending, commodity and labor inflation; the ability to effectively staff restaurants and support personnel; the Company's ability to maintain adequate levels of liquidity for its cash needs, including debt obligations, payment of dividends, planned share repurchases and capital expenditures as well as the ability of its customers, suppliers, franchisees and lenders to access sources of liquidity to provide for their own cash needs; competitive pressures from within the restaurant industry; the Company's ability to integrate and derive the expected benefits from its acquisition of Keke's Breakfast Cafe; the level of success of the Company’s operating initiatives and advertising and promotional efforts; adverse publicity; health concerns arising from food-related pandemics, outbreaks of flu viruses or other diseases; changes in business strategy or development plans; terms and availability of capital; regional weather conditions; overall changes in the general economy (including with regard to energy costs), particularly at the retail level; political environment and geopolitical events (including acts of war and terrorism); and other factors from time to time set forth in the Company’s SEC reports and other filings, including but not limited to the discussion in Management’s Discussion and Analysis and the risks identified in Item 1A. Risk Factors contained in the Company’s Annual Report on Form 10-K for the year ended December 27, 2023 (and in the Company’s subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K).

 
DENNY’S CORPORATION
Consolidated Balance Sheets
(Unaudited)
             
($ in thousands) 9/25/24   12/27/23
Assets      
  Current assets      
    Cash and cash equivalents $ 1,466     $ 4,893  
    Investments   2,902       1,281  
    Receivables, net   17,038       21,391  
    Inventories   1,835       2,175  
    Assets held for sale         1,455  
    Prepaid and other current assets   10,610       12,855  
      Total current assets   33,851       44,050  
  Property, net   101,532       93,494  
  Finance lease right-of-use assets, net   6,411       6,098  
  Operating lease right-of-use assets, net   121,169       116,795  
  Goodwill   66,357       65,908  
  Intangible assets, net   92,112       93,428  
  Deferred financing costs, net   1,225       1,702  
  Other noncurrent assets   38,966       43,343  
      Total assets $ 461,623     $ 464,818  
             
Liabilities      
  Current liabilities      
    Current finance lease liabilities $ 1,457     $ 1,383  
    Current operating lease liabilities   15,076       14,779  
    Accounts payable   14,685       24,070  
    Other current liabilities   56,474       63,068  
      Total current liabilities   87,692       103,300  
  Long-term liabilities      
    Long-term debt   261,000       255,500  
    Noncurrent finance lease liabilities   9,540       9,150  
    Noncurrent operating lease liabilities   117,390       114,451  
    Liability for insurance claims, less current portion   7,160       6,929  
    Deferred income taxes, net   4,619       6,582  
    Other noncurrent liabilities   28,705       31,592  
      Total long-term liabilities   428,414       424,204  
      Total liabilities   516,106       527,504  
             
Shareholders' deficit      
    Common stock   533       529  
    Paid-in capital   13,129       6,688  
    Deficit   (7,009 )     (21,784 )
    Accumulated other comprehensive loss, net   (43,445 )     (41,659 )
    Treasury stock   (17,691 )     (6,460 )
      Total shareholders' deficit   (54,483 )     (62,686 )
      Total liabilities and shareholders' deficit $ 461,623     $ 464,818  
             
Debt Balances
  Credit facility revolver due 2026 $ 261,000     $ 255,500  
  Finance lease liabilities   10,997       10,533  
    Total debt $ 271,997     $ 266,033  
                   
 
DENNY’S CORPORATION
Condensed Consolidated Statements of Income
(Unaudited)
           
      Quarter Ended
($ in thousands, except per share amounts) 9/25/24   9/27/23
Revenue:      
  Company restaurant sales $ 52,701     $ 53,153  
  Franchise and license revenue   59,058       61,030  
    Total operating revenue   111,759       114,183  
Costs of company restaurant sales, excluding depreciation and amortization   46,820       45,893  
Costs of franchise and license revenue, excluding depreciation and amortization   28,999       29,810  
General and administrative expenses   19,831       18,237  
Depreciation and amortization   3,622       3,605  
Operating (gains), losses and other charges, net   746       2,620  
    Total operating costs and expenses, net   100,018       100,165  
Operating income   11,741       14,018  
Interest expense, net   4,571       4,381  
Other nonoperating (income) expense, net   (824 )     43  
Income before income taxes   7,994       9,594  
Provision for income taxes   1,478       1,686  
Net income $ 6,516     $ 7,908  
           
Net income per share - basic $ 0.12     $ 0.14  
Net income per share - diluted $ 0.12     $ 0.14  
           
Basic weighted average shares outstanding   52,148       55,869  
Diluted weighted average shares outstanding   52,207       56,082  
           
Comprehensive (loss) income $ (2,468 )   $ 20,469  
       
General and Administrative Expenses  
  Corporate administrative expenses $ 15,875     $ 14,580  
  Share-based compensation   3,006       2,864  
  Incentive compensation   447       1,049  
  Deferred compensation valuation adjustments   503       (256 )
    Total general and administrative expenses $ 19,831     $ 18,237  
                   
 
DENNY’S CORPORATION
Condensed Consolidated Statements of Income
(Unaudited)
           
      Three Quarters Ended
($ in thousands, except per share amounts) 9/25/24   9/27/23
Revenue:      
  Company restaurant sales $ 159,391     $ 161,486  
  Franchise and license revenue   178,269       187,083  
    Total operating revenue   337,660       348,569  
Costs of company restaurant sales, excluding depreciation and amortization   142,516       138,953  
Costs of franchise and license revenue, excluding depreciation and amortization   89,801       92,657  
General and administrative expenses   61,539       58,515  
Depreciation and amortization   10,938       10,878  
Goodwill impairment charges   20        
Operating (gains), losses and other charges, net   1,984       2,467  
    Total operating costs and expenses, net   306,798       303,470  
Operating income   30,862       45,099  
Interest expense, net   13,564       13,288  
Other nonoperating (income) expense, net   (1,685 )     9,470  
Income before income taxes   18,983       22,341  
Provision for income taxes   4,208       5,298  
Net income $ 14,775     $ 17,043  
           
Net income per share - basic $ 0.28     $ 0.30  
Net income per share - diluted $ 0.28     $ 0.30  
           
Basic weighted average shares outstanding   52,635       56,764  
Diluted weighted average shares outstanding   52,739       56,973  
           
Comprehensive income $ 12,989     $ 31,980  
       
General and Administrative Expenses  
  Corporate administrative expenses $ 46,843     $ 43,919  
  Share-based compensation   8,406       8,477  
  Incentive compensation   4,868       5,335  
  Deferred compensation valuation adjustments   1,422       784  
    Total general and administrative expenses $ 61,539     $ 58,515  
                   
 
DENNY’S CORPORATION
Reconciliation of Net Income to Non-GAAP Financial Measures
(Unaudited)

The Company believes that, in addition to GAAP measures, certain non-GAAP financial measures are useful information to investors and analysts to assist in the evaluation of operating performance on a period-to-period basis. However, non-GAAP measures should be considered as a supplement to, not a substitute for, operating income, net income, and net income per share, or other financial performance measures prepared in accordance with GAAP. The Company uses adjusted EBITDA, adjusted net income and adjusted net income per share internally as performance measures for planning purposes, including the preparation of annual operating budgets, and for compensation purposes, including incentive compensation for certain employees. These non-GAAP measures are adjusted for certain items the Company does not consider in the evaluation of its ongoing core operating performance. These adjustments are either non-recurring in nature or vary from period to period without correlation to the Company's ongoing core operating performance.

  Quarter Ended   Three Quarters Ended
($ in thousands, except per share amounts) 9/25/24   9/27/23   9/25/24   9/27/23
Net income $ 6,516     $ 7,908     $ 14,775     $ 17,043  
Provision for income taxes   1,478       1,686       4,208       5,298  
Goodwill impairment charges               20        
Operating (gains), losses and other charges, net   746       2,620       1,984       2,467  
Other nonoperating (income) expense, net   (824 )     43       (1,685 )     9,470  
Share-based compensation expense   3,006       2,864       8,406       8,477  
Deferred compensation plan valuation adjustments   503       (256 )     1,422       784  
Interest expense, net   4,571       4,381       13,564       13,288  
Depreciation and amortization   3,622       3,605       10,938       10,878  
Legal settlement expenses   152       245       1,809       475  
Pre-opening expenses   209       105       766       130  
Other adjustments   40       (78 )     2,532       (75 )
Adjusted EBITDA $ 20,019     $ 23,123     $ 58,739     $ 68,235  
               
Net income $ 6,516     $ 7,908     $ 14,775     $ 17,043  
Losses and amortization on interest rate swap derivatives, net   194       94       502       10,838  
Losses (gains) on sales of assets and other charges, net   6       (88 )     (88 )     (2,132 )
Impairment charges (1)   78       1,711       812       1,840  
Legal settlement expenses   152       245       1,809       475  
Pre-opening expenses   209       105       766       130  
Other adjustments   40       (78 )     2,532       (75 )
Tax effect (2)   (4 )     (237 )     (1,406 )     (2,581 )
Adjusted net income $ 7,191     $ 9,660     $ 19,702     $ 25,538  
               
Diluted weighted average shares outstanding   52,207       56,082       52,739       56,973  
               
Net income per share - diluted $ 0.12     $ 0.14     $ 0.28     $ 0.30  
Adjustments per share   0.02       0.03       0.09       0.15  
Adjusted net income per share $ 0.14     $ 0.17     $ 0.37     $ 0.45  
                               
(1 ) Impairment charges include goodwill impairment charges of less than $0.1 million for the year-to-date period ended September 25, 2024.
(2 ) Tax adjustments for the quarter and year-to-date period ended September 25, 2024 reflect effective tax rates of 0.6% and 22.2%, respectively. Tax adjustments for the quarter and year-to-date period ended September 27, 2023 reflect effective tax rates of 11.9% and 23.3%, respectively.
     
 
DENNY’S CORPORATION
Reconciliation of Operating Income to Non-GAAP Financial Measures
(Unaudited)

The Company believes that, in addition to GAAP measures, certain other non-GAAP financial measures are useful information to investors and analysts to assist in the evaluation of restaurant-level operating efficiency and performance of ongoing restaurant-level operations. However, non-GAAP measures should be considered as a supplement to, not a substitute for, operating income, net income, and net income per share, or other financial performance measures prepared in accordance with GAAP. The Company uses restaurant-level operating margin, company restaurant operating margin and franchise operating margin internally as performance measures for planning purposes, including the preparation of annual operating budgets, and for compensation purposes, including incentive compensation for certain employees.

Restaurant-level operating margin is the total of company restaurant operating margin and franchise operating margin and excludes: (i) general and administrative expenses, which include primarily non-restaurant-level costs associated with support of company and franchised restaurants and other activities at their corporate office; (ii) depreciation and amortization expense, substantially all of which is related to company restaurant-level assets, because such expenses represent historical sunk costs which do not reflect current cash outlays for the restaurants; (iii) special items, included within operating (gains), losses and other charges, net, to provide investors with a clearer perspective of its ongoing operating performance and a more relevant comparison to prior period results.

Company restaurant operating margin is defined as company restaurant sales less costs of company restaurant sales (which include product costs, company restaurant level payroll and benefits, occupancy costs, and other operating costs including utilities, repairs and maintenance, marketing and other expenses) and presents it as a percent of company restaurant sales. Adjusted company operating restaurant margin is defined as company restaurant operating margin less certain items such as legal settlement expenses, pre-opening expenses, and other items the Company does not consider in the evaluation of its ongoing core operating performance.

Franchise operating margin is defined as franchise and license revenue (which includes franchise royalties and other non-food and beverage revenue streams such as initial franchise and other fees, advertising revenue and occupancy revenue) less costs of franchise and license revenue and presents it as a percent of franchise and license revenue. Adjusted franchise operating margin is defined as franchise operating margin less certain items the Company does not consider in the evaluation of its ongoing core operating performance.

Adjusted restaurant-level operating margin is the total of adjusted company restaurant operating margin and adjusted franchise operating margin and is defined as restaurant-level operating margin adjusted for certain items the Company does not consider in the evaluation of its ongoing core operating performance. These adjustments are either non-recurring in nature or vary from period to period without correlation to the Company's ongoing core operating performance.

  Quarter Ended   Three Quarters Ended
($ in thousands) 9/25/24   9/27/23   9/25/24   9/27/23
Operating income $ 11,741   $ 14,018   $ 30,862   $ 45,099  
General and administrative expenses   19,831     18,237     61,539     58,515  
Depreciation and amortization   3,622     3,605     10,938     10,878  
Goodwill impairment charges           20      
Operating (gains), losses and other charges, net   746     2,620     1,984     2,467  
Restaurant-level operating margin $ 35,940   $ 38,480   $ 105,343   $ 116,959  
               
Restaurant-level operating margin consists of:              
Company restaurant operating margin (1) $ 5,881   $ 7,260   $ 16,875   $ 22,533  
Franchise operating margin (2)   30,059     31,220     88,468     94,426  
Restaurant-level operating margin $ 35,940   $ 38,480   $ 105,343   $ 116,959  
Adjustments (3)   401     272     5,107     530  
Adjusted restaurant-level operating margin $ 36,341   $ 38,752   $ 110,450   $ 117,489  
                         
(1 ) Company restaurant operating margin is calculated as operating income plus general and administrative expenses; depreciation and amortization; operating (gains), losses and other charges, net; and costs of franchise and license revenue, excluding depreciation and amortization; less franchise and license revenue.
(2 ) Franchise operating margin is calculated as operating income plus general and administrative expenses; depreciation and amortization; operating (gains), losses and other charges, net; and costs of company restaurant sales, excluding depreciation and amortization; less company restaurant sales.
(3 ) Adjustments include legal settlement expenses, pre-opening costs, and other adjustments the Company does not consider in the evaluation of its ongoing core operating performance. Adjustments for the year-to-date period ended September 25, 2024 include a $2.6 million distribution to franchisees related to a review of advertising costs.
     
 
DENNY’S CORPORATION
Operating Margins
(Unaudited)
             
        Quarter Ended
($ in thousands) 9/25/24   9/27/23
Company restaurant operations: (1)          
  Company restaurant sales $ 52,701 100.0 %   $ 53,153   100.0 %
  Costs of company restaurant sales, excluding depreciation and amortization:          
    Product costs   13,611 25.8 %     13,587   25.6 %
    Payroll and benefits   19,838 37.6 %     19,754   37.2 %
    Occupancy   4,443 8.4 %     4,085   7.7 %
    Other operating costs:          
      Utilities   1,959 3.7 %     2,120   4.0 %
      Repairs and maintenance   964 1.8 %     996   1.9 %
      Marketing   1,859 3.5 %     1,393   2.6 %
      Legal settlements   152 0.3 %     245   0.5 %
      Pre-opening costs   209 0.4 %     105   0.2 %
      Other direct costs   3,785 7.2 %     3,608   6.8 %
  Total costs of company restaurant sales, excluding depreciation and amortization $ 46,820 88.8 %   $ 45,893   86.3 %
  Company restaurant operating margin (non-GAAP) (2) $ 5,881 11.2 %   $ 7,260   13.7 %
      Adjustments (3)   361 0.7 %     350   0.7 %
  Adjusted company restaurant operating margin (non-GAAP) (2) $ 6,242 11.8 %   $ 7,610   14.3 %
                 
Franchise operations: (4)          
  Franchise and license revenue:          
  Royalties $ 29,101 49.3 %   $ 29,703   48.7 %
  Advertising revenue   20,172 34.2 %     19,297   31.6 %
  Initial and other fees   1,639 2.8 %     3,388   5.6 %
  Occupancy revenue   8,146 13.8 %     8,642   14.2 %
  Total franchise and license revenue $ 59,058 100.0 %   $ 61,030   100.0 %
                 
  Costs of franchise and license revenue, excluding depreciation and amortization:          
  Advertising costs $ 20,172 34.2 %   $ 19,297   31.6 %
  Occupancy costs   5,256 8.9 %     5,389   8.8 %
  Other direct costs   3,571 6.0 %     5,124   8.4 %
  Total costs of franchise and license revenue, excluding depreciation and amortization $ 28,999 49.1 %   $ 29,810   48.8 %
  Franchise operating margin (non-GAAP) (2) $ 30,059 50.9 %   $ 31,220   51.2 %
    Adjustments (3)   40 0.1 %     (78 ) (0.1) %
  Adjusted franchise operating margin (non-GAAP) (2) $ 30,099 51.0 %   $ 31,142   51.0 %
                 
Total operating revenue (5) $ 111,759 100.0 %   $ 114,183   100.0 %
Total costs of operating revenue (5)   75,819 67.8 %     75,703   66.3 %
Restaurant-level operating margin (non-GAAP) (5) $ 35,940 32.2 %   $ 38,480   33.7 %
                 
(1 ) As a percentage of company restaurant sales.
(2 ) Other operating expenses such as general and administrative expenses and depreciation and amortization relate to both company and franchise operations and are not allocated to costs of company restaurant sales and costs of franchise and license revenue. As such, operating margin and adjusted operating margin are considered non-GAAP financial measures and should be considered as a supplement to, not as a substitute for, operating income, net income or other financial measures prepared in accordance with GAAP.
(3 ) Adjustments include legal settlement expenses, pre-opening costs, and other adjustments the Company does not consider in the evaluation of its ongoing core operating performance.
(4 ) As a percentage of franchise and license revenue.
(5 ) As a percentage of total operating revenue.
     
 
DENNY’S CORPORATION
Operating Margins
(Unaudited)
             
        Three Quarters Ended
($ in thousands) 9/25/24   9/27/23
Company restaurant operations: (1)          
  Company restaurant sales $ 159,391 100.0 %   $ 161,486   100.0 %
  Costs of company restaurant sales, excluding depreciation and amortization:          
    Product costs   40,554 25.4 %     41,796   25.9 %
    Payroll and benefits   60,805 38.1 %     60,482   37.5 %
    Occupancy   13,687 8.6 %     12,259   7.6 %
    Other operating costs:          
      Utilities   5,309 3.3 %     6,037   3.7 %
      Repairs and maintenance   2,977 1.9 %     2,667   1.7 %
      Marketing   5,339 3.3 %     4,207   2.6 %
      Legal settlements   1,809 1.1 %     475   0.3 %
      Pre-opening costs   766 0.5 %     130   0.1 %
      Other direct costs   11,270 7.1 %     10,900   6.7 %
  Total costs of company restaurant sales, excluding depreciation and amortization $ 142,516 89.4 %   $ 138,953   86.0 %
  Company restaurant operating margin (non-GAAP) (2) $ 16,875 10.6 %   $ 22,533   14.0 %
    Adjustments (3)   2,575 1.6 %     605   0.4 %
  Adjusted company restaurant operating margin (non-GAAP) (2) $ 19,450 12.2 %   $ 23,138   14.3 %
                 
Franchise operations: (4)          
  Franchise and license revenue:          
  Royalties $ 88,421 49.6 %   $ 90,106   48.2 %
  Advertising revenue   59,098 33.2 %     58,818   31.4 %
  Initial and other fees   5,903 3.3 %     10,994   5.9 %
  Occupancy revenue   24,847 13.9 %     27,165   14.5 %
  Total franchise and license revenue $ 178,269 100.0 %   $ 187,083   100.0 %
                 
  Costs of franchise and license revenue, excluding depreciation and amortization:          
  Advertising costs $ 59,098 33.2 %   $ 58,818   31.4 %
  Occupancy costs   15,482 8.7 %     16,853   9.0 %
  Other direct costs   15,221 8.5 %     16,986   9.1 %
  Total costs of franchise and license revenue, excluding depreciation and amortization $ 89,801 50.4 %   $ 92,657   49.5 %
  Franchise operating margin (non-GAAP) (2) $ 88,468 49.6 %   $ 94,426   50.5 %
  Adjustments (3)   2,532 1.4 %     (75 ) 0.0 %
  Adjusted franchise operating margin (non-GAAP) (2) $ 91,000 51.0 %   $ 94,351   50.4 %
                 
Total operating revenue (5) $ 337,660 100.0 %   $ 348,569   100.0 %
Total costs of operating revenue (5)   232,317 68.8 %     231,610   66.4 %
Restaurant-level operating margin (non-GAAP) (5) $ 105,343 31.2 %   $ 116,959   33.6 %
                 
(1 ) As a percentage of company restaurant sales.
(2 ) Other operating expenses such as general and administrative expenses and depreciation and amortization relate to both company and franchise operations and are not allocated to costs of company restaurant sales and costs of franchise and license revenue. As such, operating margin and adjusted operating margin are considered non-GAAP financial measures and should be considered as a supplement to, not as a substitute for, operating income, net income or other financial measures prepared in accordance with GAAP.
(3 ) Adjustments include legal settlement expenses, pre-opening costs, and other adjustments the Company does not consider in the evaluation of its ongoing core operating performance. Adjustments for the year-to-date period ended September 25, 2024 include a $2.6 million distribution to franchisees related to a review of advertising costs.
(4 ) As a percentage of franchise and license revenue.
(5 ) As a percentage of total operating revenue.
     
 
DENNY’S CORPORATION
Statistical Data
(Unaudited)
                                   
      Denny's   Keke's
Changes in Same-Restaurant Sales (1) Quarter Ended   Three Quarters Ended   Quarter Ended   Three Quarters Ended
(Increase (decrease) vs. prior year) 9/25/24   9/27/23   9/25/24   9/27/23   9/25/24   9/27/23   9/25/24   9/27/23
  Company Restaurants (0.4)%   (1.4)%   (2.0%)   4.1%   (1.7)%   (3.4)%   (2.4%)   (3.4)%
  Domestic Franchise Restaurants (0.1)%   2.1%   (0.6%)   4.3%   (0.9)%   (5.3)%   (3.2%)   (5.3)%
  Domestic System-wide Restaurants (0.1)%   1.8%   (0.7%)   4.3%   (1.0)%   (5.0)%   (3.1%)   (5.0)%
                                   
Average Unit Sales              
($ in thousands)                              
  Company Restaurants $771   $755   $2,288   $2,303   $423   $429   $1,323   $1,354
  Franchised Restaurants $465   $458   $1,395   $1,376   $439   $430   $1,368   $1,397
                                   
(1) Same-restaurant sales include sales at company restaurants and non-consolidated franchised and licensed restaurants that were open during the comparable periods noted. Total operating revenue is limited to company restaurant sales and royalties, advertising revenue, initial and other fees and occupancy revenue from non-consolidated franchised and licensed restaurants. Accordingly, domestic franchise same-restaurant sales and domestic system-wide same-restaurant sales should be considered as a supplement to, not a substitute for, the Company's results as reported under GAAP.

 

Restaurant Unit Activity Denny's   Keke's
          Franchised           Franchised    
      Company   & Licensed   Total   Company   & Licensed   Total
Ending Units June 26, 2024 64     1,477     1,541     11     51     62  
  Units Opened     2     2              
  Units Refranchised (3 )   3                  
  Units Closed     (18 )   (18 )       (1 )   (1 )
    Net Change (3 )   (13 )   (16 )       (1 )   (1 )
Ending Units September 25, 2024 61     1,464     1,525     11     50     61  
                           
Equivalent Units                      
  Third Quarter 2024 62     1,470     1,532     11     50     61  
  Third Quarter 2023 66     1,523     1,589     8     48     56  
    Net Change (4 )   (53 )   (57 )   3     2     5  
                           
Ending Units December 27, 2023 65     1,508     1,573     8     50     58  
  Units Opened     10     10     4         4  
  Units Refranchised (3 )   3         (1 )   1      
  Units Closed (1 )   (57 )   (58 )       (1 )   (1 )
    Net Change (4 )   (44 )   (48 )   3         3  
Ending Units September 25, 2024 61     1,464     1,525     11     50     61  
                           
Equivalent Units                      
  Year-to-Date 2024 63     1,485     1,548     10     50     60  
  Year-to-Date 2023 65     1,525     1,590     8     47     55  
    Net Change (2 )   (40 )   (42 )   2     3     5  
   
Investor Contact: 877-784-7167

Media Contact: 864-597-8005
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