Wolfinger expects the remodel costs and other expenditures associated with maintenance to rest between $9–10 million a year. The costs will decrease as the brand transitions.
Denny’s is also searching for new real estate to improve the quality of its portfolio. The sale of 23–29 locations will generate about $30 million in proceeds, Wolfinger said. Those earnings will be redeployed to acquire higher-quality properties. While the refranchising strategy will wrap up in early 2020, Miller expects the upgrades to continue throughout 2020.
Slow and steady off-premises growth
In order to expand the company’s off-premises channel, Denny’s is increasing brand awareness to attract younger guests. Off-premises made up 11 percent of total sales in Q3. Delivery remains the big driver. About 88 percent of the system interacts with at least one third-party service. Miller thinks the brand can get that number up to the mid-90s over time.
The sales segment is up from 7 percent when Denny’s On-Demand launched in mid-2017. There is still room to grow, but the brand isn’t forcing the issue. Denny’s sees 1–1.5 percent lift year-over-year, Miller said. He suspects the brand could reach the middle to upper teens before reaching its limit.
“To drive it beyond that might mean your business model has altered more than you want to,” Miller said. “We are not necessarily pushing to get there at some accelerated rate, but rather you watching the margins and the investment and the complexity and as technology improves.”
Integrated technology that doesn’t need multiple devices to run on is the future of Denny’s off-premises strategy. The less complicated the process is, the less likely a customer will end up with a wrong order or where an order gets lost completely. High-volume locations that have proper staffing are able to juggle delivery orders with ease. Locations with staffing issues run into delivery problems at peak hours, Miller said.
“The stores that are good at it manage multiple devices sort of teaching the rest of the system how to do it and the adoption rate has sort of stepped up with every passing quarter,” Miller said.