Top 200 Franchise by Entrepreneur – Rank no.8 – Denny’s Inc. – US
Products & Services: Full-service family restaurant
Number of Locations: 1,683
Total Investment: $1.17M – 2.4M
Began Franchising: 1963
About Denny’s Inc.
In 1953, Harold Butler opened Danny’s Donuts in Lakewood, California. Six years later, there were 20 shops in the chain and the company changed its name to Denny’s. In 1966, the company went public, and in 1977, they introduced the Grand Slam breakfast. Today, Denny’s locations serve breakfast, lunch and dinner choices 24 hours a day, 365 days a year. Its corporate headquarters is in Spartanburg, South Carolina.
Startup Costs, Ongoing Fees and Financing
Franchise Fee: $40,000
Ongoing Royalty Fee: 4%
Term of Franchise Agreement: 20 years
Net Worth: $1,000,000
Liquid Cash Available: $350,000
66% of all franchisees own more than one unit. Number of employees needed to run franchised unit: 80. Absentee ownership of franchise is allowed..
|FINANCING TYPE||IN-HOUSE||THIRD PARTY|
How This Franchise Supports Franchisees
Franchise Ranking History
The 2005-present logo
|Type||Public (NASDAQ: DENN)|
|Headquarters||Spartanburg, South Carolina, U.S.|
|Number of locations||1,650+|
|Revenue||US$ $538.53 million (2011)|
|Operating income||US$50.97 million (2011)|
|Net income||US$112.29 million (2011)|
|Total assets||US$350.50 million (2011)|
|Total equity||US$(-9.68) million (2011)|
Denny’s (also known as Denny’s Diner on some of the locations’ signage) is a full-service pancake house/coffee shop/fast casualfamily restaurant chain. It operates over 1,600 restaurants in the United States (including Puerto Rico), Canada, El Salvador, Curaçao,Costa Rica, Venezuela, Honduras, Japan (transliterated as デニーズ Denīzu), Mexico, New Zealand, Qatar, and the United Arab Emirates.
Denny’s is known for always being open, serving breakfast, lunch, dinner, and dessert around the clock. Unlike many other restaurant chains, Denny’s does not close on holidays or nights, except where required by law. Many of their restaurants are located in proximity to freeway exits, bars and in service areas. Denny’s started franchising in 1963, and most Denny’s restaurants are now franchisee-owned.
Richard Jezak and Harold Butler founded Denny’s (as Danny’s Donuts) in Lakewood, California in 1953. Denny’s expanded to twenty restaurants by 1959, when the chain was renamed Denny’s to avoid confusion with another chain, “Doughnut Dan’s". The business continued to grow and by 1981, there were over 1,000 restaurants in all 50 U.S. states. In 1977, Denny’s introduced the still-popular Grand Slam breakfast. In 1994, Denny’s became the largest corporate sponsor of Save the Children, a national charity. All but six Denny’s closed for the first time ever on Christmas1988; many of the restaurants were built without locks, and some had reportedly lost their keys.
Denny’s main office was located in Irvine, California, until 1991. At that time, the office was moved to the Spartanburg, South Carolina, headquarters of the parent company Trans World Corporation (TW Corporation) that acquired Denny’s in 1987. In 1992, private equityfirm, Kohlberg Kravis Roberts acquired a 47% interest in TW Corporation, later known as The Flagstar Companies, and encouraged the company to sell non-core businesses. Eventually, Denny’s operations dominated the parent company to such an extent that The Flagstar Companies changed its name again to Denny’s Corporation. It now trades on the NASDAQ under the symbol DENN.
For much of its history, Denny’s offered a free meal to anyone on his or her birthday. The offer included a limited number of meal options from a special birthday menu. The promotional ritual ceased in 1993; though occasionally individual franchises will continue the tradition.
The Denny’s Diner prototype
Some Denny’s restaurants use the “Diner" concept, using modular buildings that resemble classic 1950s diners. In May 1997, the first Denny’s Classic Diner was opened in Fort Myers, Florida. The Diner concept was created by Ron, Marcia, Marc, and Todd York, the principals of Denny’s Franchisee SWFRI, Inc. Today there are about forty Denny’s Diners in the United States. In addition, there are several diners that resemble the modular buildings but are actually stick construction.
Domestic and international growth
In July 2010, Denny’s presence in the United States saw a major expansion when Pilot Flying J started opening Denny’s locations inside their Flying J-branded truck stop locations. 123 Pilot Flying J conversions were completed, making Denny’s the leading full service restaurant brand in travel centers.
As of the end of 2011 there were 1,685 total Denny’s restaurants. While the company owns and operates some restaurants, the majority are operated through a franchising model. 1,593 of Denny’s 1,685 restaurants are located in the 50 U.S. states (including the District of Columbia), 11 in Puerto Rico, 2 in Guam, 60 in Canada, 5 in Mexico, 3 in Costa Rica, 2 in Honduras, and 8 in New Zealand. There is also a Denny’s attached to the Holiday Beach Hotel in Otrabanda, Willemstad, Curaçao in the Netherlands Antilles. Along with the regular Denny’s Menu, the Curaçao restaurant offers a selection of local (“kriyoyo") dishes. There are also about 578 Denny’s restaurants in Japan operated independently under a license by a subsidiary of Seven & I Holdings.
In June 2012, Denny’s opened a location in the Las Américas International Airport, its first location in an airport and its first in theDominican Republic. In July 2012, Denny’s announced it had signed an agreement with a franchisee to open 50 restaurants in southern China over 15 years, beginning in 2013. This makes it Denny’s largest international development deal yet.
Health inspection records
In October 2004, Dateline NBC aired a segment titled “Dirty Dining". This segment examined the 10 most popular family and casual dining chains in the United States: Bob Evans, Red Lobster, Waffle House, Chili’s, Ruby Tuesday, IHOP, Applebee’s, TGI Friday’s,Outback Steakhouse, and Denny’s. As part of the segment, the producers examined the health inspection records for 100 restaurants over 15 months and totaled all of the critical violations, or violations that can result in adverse effects to the customers’ health. Denny’s had the fewest violations of the 10 chains evaluated by Dateline and was the only one to average fewer than one violation per restaurant. Denny’s attributes this relative success to its adherence to the principles of Hazard Analysis and Critical Control Points.
Animal welfare efforts
Denny’s works with the Humane Society of the United States to address animal welfare issues. In 2008, Denny’s began switching tocage-free eggs, and in 2012 the company announced that it will work with its suppliers to move away from the practice of keeping pigs ingestation crates.
Racial discrimination lawsuits
During the 1990s, Denny’s was involved in a series of discrimination lawsuits involving several cases of servers denying or providing inferior service to racial minorities, especially black customers.
In 1994, Denny’s settled a class action lawsuit filed by thousands of black customers who had been refused service, forced to wait longer, or pay more than white customers. The $54.4 million settlement was the largest and broadest under federal public-accommodations laws established thirty years previously to end segregation in restaurants and public spaces.
The following are some of the most notable incidents involving racial discrimination at Denny’s, all occurring after the settlement:
- A black Denny’s customer was told, in 1995, that he and his friends had to pay up front at the counter upon ordering their meals. He questioned the waitress: “We asked the waitress about it and she said some black guys had been in earlier who made a scene and walked out without paying their bill. So the manager now wanted all blacks to pay up front."
- Another 1993 incident occurred when six black United States Secret Service agents visited a Denny’s restaurant in Annapolis,Maryland. They were forced to wait an hour for service while their white companions were seated immediately upon entering.
- In San Jose, California, in 1994, several black teenagers were refused service unless they agreed to pay in advance.
- In 1997, six Asian-American students from Syracuse University visited a local Denny’s restaurant late at night. They waited for more than half an hour as white patrons were regularly served, seated, and offered more helpings. They complained to management and to their server but were forced to leave the establishment by two security guards called by Denny’s management. Then, according to the students, a group of white men came out of Denny’s and attacked them and shouted racial epithets. Several of the students were beaten into unconsciousness.
After the $54.4 million settlement, Denny’s created a racial sensitivity training program for all employees. Denny’s has also made efforts at improving its public relations image by featuring blacks in their commercials, including one featuring Sherman Hemsley and Isabel Sanford, both actors from the popular The Jeffersons television series. In 2001, Denny’s was chosen by Fortune magazine as the “Best Company for Minorities." In 2006 and 2007, Denny’s topped Black Enterprise‘s “Best 40 Companies for Diversity."