A sign is posted in front of a Denny's restaurant on February 13, 2023 in Emeryville, California.Denny's will temporarily add surcharges to meals that contain eggs as Americans contend with a shortage of the staple food item, the restaurant chain said Monday.The South Carolina-based company said the size of the surcharge will vary across its approximately 1,500 locations. It marks the latest shift for consumers and businesses alike as they grapple with the the bird flu's effects on egg availability and cost ...

Restaurant Operations - Denny's operates 1,499 restaurants globally, with 1,334 in the U.S. and 165 internationally, of which 96% are franchised or licensed[17] - Keke's, acquired on July 20, 2022, has 69 restaurants, with 80% being franchised, and off-premises sales represented about 16% of total sales in 2024[19][18] - Denny's anticipates the majority of future growth will come from franchised restaurant development, with 1,438 franchised restaurants as of December 25, 2024[29] - The company opened three international franchised locations in 2024, including one each in Canada, Honduras, and the Philippines[26] - Approximately 90% of Denny's domestic franchised restaurants operated under traditional franchise agreements as of December 25, 2024[22] Sales Performance - Off-premises sales, including delivery and virtual brands, accounted for approximately 20% of total sales in 2024[16] - Denny's average daily sales breakdown: breakfast 28%, lunch 36%, dinner 20%, and late night 16%[16] - Approximately 38% of weekly sales occur from Friday late night through Sunday lunch, indicating strong weekend performance[16] - Keke's off-premises sales represented approximately 16% of total sales in 2024[18] - The restaurant sales are generally higher in the second and third quarters, with potential impacts from severe weather conditions[61] Development and Growth - The company has 64 domestic development commitments as of December 25, 2024, to enhance market share in under-penetrated areas[25] - Keke's plans to open more company-operated cafes to accelerate brand expansion, with 23 development agreements for 141 franchised cafes[30] Employee Engagement and Diversity - The company offers Modern Health Mental Wellness benefits to all full-time employees and their families, along with a comprehensive Employee Assistance Program available 24/7[48] - Approximately 75% of the total workforce and 77% of restaurant management are diverse, with 64% of domestic restaurants owned by diverse franchisees[58] - The company offers a comprehensive benefits package, including a 401(k) savings plan, tuition reimbursement, and a competitive vacation policy to support employee well-being[48] - The company focuses on employee engagement through periodic surveys, leading to numerous policy changes based on feedback[47] Technology and Operations - The company invests in technology to enhance operations, including online ordering and payment systems, and has a robust cloud-based Enterprise Resource Planning (ERP) platform[55] - The company has invested in technology to enhance operations, including a cloud-based ERP platform that supports finance, accounting, and human resources functions[55] - The company is committed to developing new technologies and R&D efforts to improve guest experience, including online ordering and payment solutions[54] Corporate Governance and Ethics - The Board of Directors consists of nine directors, with 56% from diverse backgrounds and 56% being women[58] - The company maintains a code of ethics applicable to key executives and all salaried employees, ensuring accountability and ethical conduct[82] - Amendments or waivers to the Denny's Code of Conduct will be posted on the company's website, emphasizing transparency in governance[82] Community Engagement - The company is committed to community engagement, including initiatives like the Denny's Hungry for Education® Scholarship program and partnerships with No Kid Hungry[57] - The company has implemented initiatives to fight childhood hunger and increase spending with diverse businesses[57] Compliance and Security - The company maintains compliance with Payment Card Industry Data Security Standards (PCI DSS) to protect customer data and has implemented point-to-point encryption[56] - The company is committed to cybersecurity, maintaining compliance with PCI Data Security Standards and continuously enhancing its cybersecurity capabilities[56] - The company is subject to various federal, state, and international regulations affecting its operations, including health and safety standards[67] Competitive Position - The company has a strong competitive position with brand recognition, well-located restaurants, and economies of scale in advertising and purchasing[65] - The restaurant industry is highly competitive, with the company competing against national chains, independent operators, and quick-service restaurants[63] Financial Information - Denny's domestic contractual royalty rate averaged approximately 4.36% during 2024, with franchisees contributing up to 3.25% for marketing[22] - The average royalty rate for Denny's domestic franchise agreements was approximately 4.36% in 2024[22]

Core Insights - Denny's has a market capitalization of just under $250 million and has experienced poor performance over the past decade [1] Company Overview - Denny's is known for its Original Grand Slam breakfast offering [1] Investment Perspective - The article aims to uncover interesting investment ideas, suggesting that Denny's may be overlooked despite its long-standing presence in the market [1]

Group 1 - The company specializes in analyzing restaurant stocks in the U.S. market, covering various segments such as QSR, fast casual, casual dining, fine dining, and family dining [1] - Advanced analytical models and specialized valuation techniques are employed to provide detailed insights and actionable strategies for investors [1] - The founder actively engages in academic and journalistic initiatives, contributing to institutions that promote individual and economic freedom [1] Group 2 - The company has no stock, option, or similar derivative position in any of the companies mentioned, nor plans to initiate any such positions within the next 72 hours [2] - The article expresses the author's own opinions and is not receiving compensation from any company mentioned [2] - Seeking Alpha clarifies that past performance is not a guarantee of future results and that no investment recommendations are being made [3]

Financial Performance - Denny's shares dropped significantly by 22% following the release of its fourth-quarter financial results for 2024, nearing a decade-low price [1] - Same-store sales for Denny's flagship brand decreased by less than 1%, but this figure does not account for the closures of underperforming locations [3] - In early 2025, same-store sales trends worsened, with a reported drop of 5% in the first two weeks of February, leading management to anticipate a total decline of up to 2% for the year [4] Business Operations - The company closed 88 underperforming restaurants in 2024, which had an average annual sales volume of under $1.1 million, prompting plans to close an additional 70 to 90 locations in 2025 [2] - Denny's management acknowledged that many of the closed restaurants had been operational for about 30 years, indicating a need to reposition in more favorable areas [5] - In 2024, Denny's opened 14 new locations and plans to open between 25 to 40 new locations in the current year, including those for its smaller Keke's brand [5] Market Position - Denny's is facing challenges in stimulating sales growth and improving profit margins, indicating a need for strategic changes to enhance its market position [6]

Financial Data and Key Metrics Changes - Denny's reported fourth quarter domestic system-wide same-restaurant sales of positive 1.1% and outperformed the BBI Family Dining Index for the fourth consecutive quarter [25] - Average guest check increased approximately 6.5% compared to the prior year quarter, attributed to a categorization change in the $2 $4 $6 $8 Value Menu [26] - Total operating revenue was $114.7 million compared to $115.4 million for the prior year quarter, primarily driven by refranchising and strategic closures [35] Business Line Data and Key Metrics Changes - Denny's maintained positive quarter-over-quarter same-restaurant sales at positive 1.1%, while Keke's generated same-restaurant sales of positive 3% [8] - Domestic franchise restaurants delivered same-restaurant sales of positive 1.2%, while company same-restaurant sales were flat compared to the prior year quarter [25] - Keke's opened 8 new cafes during the fourth quarter, marking the highest number of openings in a year since its founding [32] Market Data and Key Metrics Changes - Denny's outperformed the BBI Family Dining sales index for the fourth consecutive quarter, indicating strong market performance [9] - Keke's outperformed the BBI Family Dining sales index in Florida for the second consecutive quarter [9] - System-wide same-restaurant sales for Keke's were impacted by approximately 110 basis points due to Hurricanes Helene and Milton [30] Company Strategy and Development Direction - The company is focused on executing profitable traffic-driving initiatives and expanding its growth brand, Keke's Breakfast Cafe [7] - Denny's is leaning into off-premise strategies and expanding its virtual brands, which contributed significantly to same-restaurant sales growth [12] - The company plans to accelerate the closure of lower-volume restaurants to improve franchisee cash flow and reinvest in traffic-driving initiatives [28][48] Management Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term fundamentals of being America's diner despite recent consumer sentiment shifts [22] - The company anticipates a temporary decline in same-restaurant sales due to evolving macroeconomic factors but remains optimistic about future sales initiatives [21][46] - Management noted that they are prepared to navigate the current environment with a focus on value leadership and strategic initiatives [66] Other Important Information - Denny's completed 23 remodels during 2024, which delivered a 6.5% sales lift during testing [29] - The company plans to deploy between $15 million and $25 million towards share repurchases in 2025 [53] - Commodity inflation was approximately 3% during the quarter, driven by increases in pork, orange juice, and eggs [39] Q&A Session Summary Question: Can you revisit your confidence in expanding both company margins and franchise margins? - Management expressed high confidence in expanding company margins despite recent softness in sales trends, with improvements expected in cafes owned for more than 12 months [57][58] Question: Can you unpack the commentary about the shift in sales trends starting in late January? - Management noted that weather and inflation uncertainties impacted sales trends, but they remain confident in their initiatives and value leadership position [65][66] Question: What is the marketing strategy for 2025? - Management confirmed that they will continue to emphasize the $2 $4 $6 $8 platform while balancing it with innovation and premium items [80][84] Question: Can you provide more detail on the franchise agreements that were canceled? - Management clarified that the cancellations were due to the franchisees' balance sheets, and they are optimistic about capturing additional corporate cafes in the Orlando market [95][96]

Core Insights - Denny's reported revenue of $114.67 million for Q4 2024, a year-over-year decline of 0.6%, and EPS of $0.14, unchanged from the previous year [1] - The revenue fell short of the Zacks Consensus Estimate of $115.61 million, resulting in a surprise of -0.81%, while the EPS also missed the consensus estimate of $0.15 by -6.67% [1] Financial Performance Metrics - Same-Restaurant Sales for Domestic Franchise Restaurants increased by 1.2%, exceeding the five-analyst average estimate of 0.8% [4] - Total number of restaurants at the end of the period was 1,568, slightly below the five-analyst average estimate of 1,575 [4] - Company-operated restaurants totaled 75, compared to the five-analyst average estimate of 76 [4] Revenue Breakdown - Franchise and license revenue was reported at $62.28 million, surpassing the five-analyst average estimate of $61.71 million, reflecting a year-over-year increase of 1.6% [4] - Company restaurant sales were $52.39 million, below the average estimate of $53.88 million, indicating a year-over-year decline of 3.1% [4] - Advertising revenue within franchise and license revenue was $20.88 million, exceeding the estimate of $20.34 million, with a year-over-year increase of 6.1% [4]

Core Viewpoint - The article emphasizes the importance of value investing and highlights Denny's (DENN) as a strong value stock based on various financial metrics [2][8]. Company Analysis - Denny's (DENN) has a Zacks Rank of 2 (Buy) and an A for Value, indicating strong potential for value investors [4]. - The stock is currently trading at a P/E ratio of 11.95, significantly lower than the industry average of 27.64 [4]. - Denny's has a PEG ratio of 1.33, compared to the industry's average PEG of 2.07, suggesting it is undervalued relative to its expected EPS growth [5]. - The P/S ratio for Denny's is 0.76, which is slightly below the industry average of 0.8, reinforcing its undervaluation [6]. - The P/CF ratio for Denny's stands at 11.09, well below the industry's average of 24.10, indicating a favorable cash flow outlook [7]. - Overall, the financial metrics suggest that Denny's is likely undervalued and stands out as one of the market's strongest value stocks [8].

Financial Performance - Denny's reported quarterly earnings of $0.14 per share, missing the Zacks Consensus Estimate of $0.15 per share, representing an earnings surprise of -6.67% [1] - The company posted revenues of $114.67 million for the quarter ended December 2024, missing the Zacks Consensus Estimate by 0.81%, compared to year-ago revenues of $115.35 million [2] - Over the last four quarters, Denny's has not surpassed consensus EPS or revenue estimates [2] Stock Performance - Denny's shares have increased approximately 11.1% since the beginning of the year, outperforming the S&P 500's gain of 3.2% [3] - The current consensus EPS estimate for the coming quarter is $0.11 on revenues of $111.89 million, and for the current fiscal year, it is $0.58 on revenues of $468.79 million [7] Industry Outlook - The Retail - Restaurants industry is currently in the top 26% of over 250 Zacks industries, indicating a favorable outlook [8] - Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions, suggesting that the industry outlook can significantly impact stock performance [5][8]

Sales Performance - Denny's domestic system-wide same-restaurant sales increased by 1.1% in Q4 2024, while Keke's saw a 3.0% increase[6]. - For the fiscal year 2024, Denny's same-restaurant sales decreased by 0.2%, and Keke's experienced a decline of 1.7%[6]. Restaurant Operations - Denny's closed 30 restaurants in Q4 2024 as part of a strategy to accelerate the closure of lower volume locations[6]. - Keke's opened eight new cafes in Q4 2024, expanding into four new states: California, Colorado, Nevada, and Texas[6]. - Denny's completed 23 remodels under the Diner 2.0 program during the fiscal year, including seven company-operated restaurants[6]. - Keke's achieved a record of 12 openings in a single year, growing to six different states[6]. - As of December 25, 2024, Denny's Corporation operated a total of 1,568 restaurants, with 1,493 being franchised[12]. Financial Performance - The company ended 2024 with $261.3 million in borrowings under its credit facility[6]. - Denny's anticipates achieving the low end of its Adjusted EBITDA guidance range of $81 million to $84 million for 2024[6]. - The company plans to release detailed financial results and guidance for 2025 on February 12, 2025[5].