Currently, 74 percent of Denny’s restaurants are remodeled, leaving 26 percent of the system vulnerable on dinner initiatives, he added. Franchisees completed 48 remodels to the “Heritage remodel program” in the quarter, and the company refreshed three other restaurants. The units are generating a mid-single digit sales lift, Miller said. Denny’s expects to have about 80 percent of the system completed by the end of 2018.
Denny’s made progress to other key areas, but the overall sales picture didn’t please investors. The chain’s shares fell more than 6 percent Tuesday after net income totaled $11.6 million, or 18 cents per share. Adjusted EPS was 18 cents and revenue totaled $157.3 million, up from $133.4 million. FactSet consensus called for EPS of 17 cents and revenue of $161 million. To date, Denny’s shares have gained 9.4 percent for 2018.
Just Monday, Denny’s beefed up its burger lineup with new options that come with fries and start at just $6.99. The new, hand-pressed 100 percent beef burgers come in a new America’s Diner Cheeseburger option (caramelized onions and classic American cheese covered with Denny’s new All-American sauce); Spicy Sriracha Burger (Cheddar cheese, bacon, jalapeños and a creamy Sriracha sauce); and Bacon Avocado Cheeseburger (crispy bacon, fresh avocado and melted cheese).
Since launching Denny’s on Demand last year, off-premises sales have boosted more than 300 basis points as a percentage of total sales, and delivery continues to drive the expansion of Denny’s business, Miller said. Off-premises sales represented more than 10 percent of total sales at company restaurants in Q2 and about 9.5 percent at franchised units. About 60 percent of the domestic system is now actively engaged with at least one delivery partners, and the to-go transactions continue to be highly incremental, he added. It remains over-indexed to the late-night and dinner dayparts and skewed to the 18–34-year-old demographic.
“While the additional delivery fee to total margin, with the additional delivery fee, the total margin rate on third-party delivery transactions ranges from the low teens to upper 20 percent,” Miller said. “We anticipate continued long-term growth in the off-premises sales from the Denny’s on Demand platform as more restaurants expand their delivery channels.”