Meanwhile, Denny’s U.S. same-store sales increased 2.5 percent in Q2 year-over-year, fueled by 10 percent growth in average check. The rise in average check comprised 3.5 percent carryover pricing from 2021, more than 3 percent pricing taken this year, and 3 percent product mix benefits. The brand’s comps lifted 1.8 percent against pre-pandemic comparisons.
Average weekly sales per restaurant were $35.7 million ($1.9 million annualized AUV), an improvement from the first quarter. Of that number, off-premises mixed about 18 percent, and virtual brands The Burger Den and The Metldown accounted for approximately 2.5 percent of sales. The Burger Den is active in more than 1,100 domestic locations. The Meltdown is in nearly 900 stores and will add more third-party delivery partners after being exclusive to DoorDash.
The chain’s biggest priority is returning to 24/7. A little more than 50 percent of the U.S. system has returned to full hours, which isn’t much better than where Denny’s was in early 2022. Units that are 24/7 consistently outperform other locations by mid-teen-digit comp sales relative to 2019. The biggest barrier is staffing, and the company is working with its franchise association to introduce incentives and labor retention initiatives.
About 83 percent of U.S. stores are operating at least 18 hours per day. These locations are running with 80-85 percent staffing, or missing about seven to 10 employees.
“There's an urgent plan,” Valade said. “We've even got it down to the kinds of numbers we will want to see per week, per month. This is not over several quarters, but yet a lot of urgency and a lot of focus between us and those franchisees right now. So it's urgent and I think doable. I think they are tired of looking at the same situation and the inflationary pressures. They all feel that, and they want those solutions that we've now got.”
In light of inflation, Denny’s recently launched its Summer Slamcation Value Promotion, including Endless Breakfast and its $6.99 Super Slam combo (bacon, eggs, hash browns, and pancakes). Because of those offerings, value incidence rose 3 percent in the second quarter, and Denny’s is seeing traffic benefits that more than offset the costs.
The company is likely to phase out its $2, $4, $6, $8 value menu, which helped the brand through the Great Recession and was brought back during pandemic times. That’s not to say Denny’s isn’t going more deeply into value, Verostek said; it’s just that the definition of value is different than it was a decade ago.
“I think that the idea of value may be changing right?” the CFO said. “You pay for what you get. And so a $2 price point may have served the purpose a decade ago. I'm not saying that that value is now a $15 plate. This will be price-point oriented. But I think we may have moved beyond that. It doesn't mean that we don't have a significant pipeline of ways to offer value into our system right now.”
Denny’s finished Q2 with 1,631 stores systemwide, with 1,477 in the U.S. New kitchen equipment has been installed at approximately 50 percent of U.S. locations, and that rollout should be mostly done by the end of 2022. The chain’s new cloud-based tech platform is in beta test, and should be substantially launched in domestic outlets by the end of 2023.