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].

Core Insights - Denny's Corporation reported strong performance in 2024, with both Denny's and Keke's outperforming their respective BBI Family Dining indices in Q4 [2] - The company is focusing on enhancing brand health by closing lower-volume restaurants, remodeling existing locations, and expanding Keke's into new states [2] - The outlook for 2025 anticipates challenges due to macroeconomic factors affecting consumer sentiment, but the company is positioned to deliver shareholder value through strategic actions [2] Fourth Quarter 2024 Highlights - Total operating revenue was $114.7 million, slightly down from $115.4 million in the prior year quarter [6] - Franchise and license revenue increased to $62.3 million from $61.3 million, driven by higher local advertising contributions [6] - Denny's same-restaurant sales were up 1.1%, while Keke's saw a 3.0% increase [6] - Operating income rose to $14.5 million from $7.7 million in the prior year quarter [6] - Net income was $6.8 million, or $0.13 per diluted share, compared to $2.9 million, or $0.05 per diluted share, in the prior year [10][28] Full Year 2024 Highlights - Total operating revenue for the year was $452.3 million, down from $463.9 million in the previous year [6] - Denny's same-restaurant sales decreased by 0.2%, while Keke's same-restaurant sales fell by 1.7% [6] - Operating income for the year was $45.3 million, down from $52.8 million [6] - Net income for the year was $21.6 million, or $0.41 per diluted share, compared to $19.9 million, or $0.36 per diluted share, in the previous year [31] Capital Allocation - The company invested $10.9 million in cash capital expenditures during Q4 and $28.6 million for the full year, focusing on Keke's new cafe development and remodels [12] - Share repurchases totaled $11.2 million for the year, with approximately $89.2 million remaining under the existing repurchase authorization [12] Business Outlook for 2025 - Denny's expects same-restaurant sales to range between -2.0% and 1.0% [13] - The company plans to open 25 to 40 new restaurants while closing 70 to 90 [13] - Commodity inflation is anticipated to be between 2.0% and 4.0%, and labor inflation between 2.5% and 3.5% [13] - Adjusted EBITDA is projected to be between $80 million and $85 million [13]