Denny's Corporation reported results for its second quarter ended June 25, 2014.
Second Quarter Summary
- Domestic system-wide same-store sales increased 1.9 percent, comprised of a 3.7 percent increase at company restaurants and 1.7 percent increase at domestic franchised restaurants.
- 43 remodels were completed at company and franchise restaurants, including 30 in the new Heritage image.
- Net Income of $8.3 million increased 33.5 percent compared with the prior year quarter
- Generated $11.6 million of Free Cash Flow* after remodel investments at company restaurants.
"We generated another quarter of growing franchise and company same-store sales as we continue to build on the positive momentum from our brand revitalization," says John Miller, president and CEO. "Our America's diner strategy, supported by our newly launched Heritage remodel program, continues to resonate with our guests and our franchisees.
"The investments we are making in our remodel program contributed to our company restaurants growing same-store guest traffic for the second consecutive quarter. We remain focused on driving long-term shareholder value through our brand revitalization strategy."
Key considerations impacting the Company's outlook for 2014 include:
- 2014 will include 53 operating weeks (14 in the fourth quarter) compared to 52 operating weeks in 2013.
- The highest volume company operated restaurant located on the Las Vegas Strip is closed for reconstruction and expected to reopen in early 2015. In 2013, this restaurant generated $7.9 million of sales and $2.9 million of pre-tax operating income. The new retail development will include a completely reconstructed Denny's restaurant, funded by the landlord, where Denny's will have a new long-term lease.
Second Quarter Results
Denny's total operating revenue, including company restaurant sales and franchise and license revenue, was $114.6 million, resulting from a reduction in both company restaurant sales and franchise and license revenue.
Franchise and license revenue was $33.5 million compared with $33.7 million due to a decrease in occupancy revenue, partially offset by an increase in royalty revenue from nine additional equivalent franchised restaurants. Company restaurant sales were $81.1 million compared with $82.8 million due to five fewer equivalent company restaurants.
The reduction in equivalent company restaurants includes the impact of the previously announced temporary closure for the reconstruction of the highest volume restaurant located in Las Vegas and temporary closures for remodeling restaurants. The decrease in company restaurant sales was partially offset by a 3.7 percent increase in same-store sales during the quarter.