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Denny’s Valade on Value, Keke’s Strong Growth · Choppin’ It Up by Bloomberg Intelligence

• 0:13
  Speaker 1: Welcome to Chopping it Up.
• 0:15
  Speaker 2: I'm your host, Mike Hallon, the senior restaurant and food
• 0:17
  Speaker 2: Service analyst at Bloomberg Intelligence. Today we're joined by Kelly Valaid,
• 0:21
  Speaker 2: CEO of Denny's. It's good to see you, Kelly.
• 0:24
  Speaker 3: Good to see you, Good to see you, good to
• 0:25
  Speaker 3: be here.
• 0:27
  Speaker 2: So I saw on LinkedIn that you recently spoke at
• 0:29
  Speaker 2: the Women's Food Service Forum. You're a fantastic public speaker.
• 0:33
  Speaker 2: I will always remember your address you did at the
• 0:36
  Speaker 2: Hot Schedules user conference like years ago.
• 0:40
  Speaker 1: Fan of your public speaking skills. Would you discuss at WFF.
• 0:45
  Speaker 3: Yeah, thank you for that. That was a long time ago, Michael.
• 0:48
  Speaker 3: What it feels like a decade ago?
• 0:50
  Speaker 4: It might be about six seven years ago at a
• 0:53
  Speaker 4: Hot Schedules event.
• 0:54
  Speaker 3: Yeah.
• 0:55
  Speaker 4: At WFAFT they asked me to speak about leadership lessons
• 1:00
  Speaker 4: I have learned along the way.
• 1:01
  Speaker 3: So and it was a full hour.
• 1:03
  Speaker 4: So the funny part about it was a real fun
• 1:05
  Speaker 4: part about it was I thought, a whole hour, Okay,
• 1:08
  Speaker 4: I'll get audience participation, There'll be hopefully a good crowd
• 1:11
  Speaker 4: in the room. I can feed off that I do
• 1:13
  Speaker 4: well when I can really look at people and feed
• 1:15
  Speaker 4: off of their energy and there's amazing energy in the room.
• 1:19
  Speaker 3: And I talked for fifty seven and a half minutes.
• 1:21
  Speaker 3: There was actually no time for Q and A left
• 1:23
  Speaker 3: and it's but it really went well. It was streaming
• 1:25
  Speaker 3: at the same time.
• 1:26
  Speaker 4: WFF had an amazing turnout, like they always do. And
• 1:30
  Speaker 4: it's just really an honor actually to be able to
• 1:33
  Speaker 4: speak to men and women about things I've learned along
• 1:36
  Speaker 4: the way, which if you know me, there's you know,
• 1:38
  Speaker 4: the intersection between life and work.
• 1:40
  Speaker 3: You know, they're one and the same.
• 1:41
  Speaker 4: And I told a lot of personal stories and they
• 1:45
  Speaker 4: said share leadership mistakes too, so I said, no problem,
• 1:49
  Speaker 4: many of those to share.
• 1:51
  Speaker 3: So we had a great, great conversation.
• 1:54
  Speaker 1: Very cool. Is there a link to see a replay?
• 1:57
  Speaker 4: You know, I'm asked about that because I've had some
• 1:58
  Speaker 4: people that couldn't make it ask and I'm waiting to
• 2:01
  Speaker 4: get that from the team at WFF. I think they're
• 2:03
  Speaker 4: probably on a much needed vacation, a few of them
• 2:05
  Speaker 4: after that.
• 2:07
  Speaker 1: Side, I'm sure. All right, Well, if you get it, please.
• 2:11
  Speaker 3: Share it, happy to share it, happy to all.
• 2:14
  Speaker 2: Right, let's address the six hundred pound gorilla in the
• 2:16
  Speaker 2: room or eight hundred pund what is it? Eight hundred
• 2:18
  Speaker 2: pound goerilla? Yeah, the US consumer. So you know, you
• 2:22
  Speaker 2: talked about consumer weakness in January and February on the call.
• 2:27
  Speaker 2: Company owned units outperformed by one hundred and eighty basis
• 2:30
  Speaker 2: points in January four hundred basis points in February due
• 2:33
  Speaker 2: to less exposure to Midwest mid Atlantic, which were hit
• 2:36
  Speaker 2: ordered by the crummy weather. Right, it was the oldest
• 2:39
  Speaker 2: January fourteen years. We had some snow in February. So
• 2:44
  Speaker 2: there's been a lot of consternation about the consumer, mostly
• 2:47
  Speaker 2: stemming from these sentiment surveys, and I look at them,
• 2:49
  Speaker 2: and surveys aren't always the best indicator moving forward, you know.
• 2:55
  Speaker 1: That's kind of where we sit.
• 2:56
  Speaker 2: We think this year is going to be a better
• 2:57
  Speaker 2: year for restaurant spending, but it's clearly off to a
• 3:00
  Speaker 2: slower start than you expected.
• 3:02
  Speaker 1: What are you seeing in the numbers?
• 3:04
  Speaker 2: In your numbers that would suggest a weaker consumer beyond
• 3:08
  Speaker 2: just staying home under a pile of blankets until it
• 3:11
  Speaker 2: warms up.
• 3:12
  Speaker 4: Sure, I think you've articulated it well, right, I think
• 3:16
  Speaker 4: you do have a skittish consumer, if you will. Consumer
• 3:19
  Speaker 4: sentiment numbers, you know, sometimes they follow the hype and
• 3:22
  Speaker 4: they follow the conversation, you know, self fulfilling or not.
• 3:25
  Speaker 3: There's a lot going on. So you mentioned the worst weather.
• 3:28
  Speaker 4: I grew up in Upstate New York and got pictures
• 3:30
  Speaker 4: from my brother who lives up there. Still worse in
• 3:32
  Speaker 4: a decade in terms of the snow, and worst around
• 3:36
  Speaker 4: the country in terms of even even the fourth quarter,
• 3:38
  Speaker 4: right with Helen with the fires.
• 3:40
  Speaker 3: So it's been just crazy time for those reasons.
• 3:43
  Speaker 4: And one of the things you didn't mention was the
• 3:44
  Speaker 4: flu season, right, which keeps people at home.
• 3:47
  Speaker 3: Our off premise business. Actually, we can see the hard
• 3:49
  Speaker 3: work we're.
• 3:50
  Speaker 4: Doing in digital and in that space actually pay off
• 3:53
  Speaker 4: a little bit at this time. So what I can
• 3:56
  Speaker 4: say and what we've shared, you know, obviously it's inner
• 3:58
  Speaker 4: quarter for us. What I can and share is that
• 4:01
  Speaker 4: that consumer does you know everything I think we're seeing.
• 4:04
  Speaker 4: We too had a had optimism even at ICR in
• 4:08
  Speaker 4: January where we're able to kind of talk about and
• 4:10
  Speaker 4: pre release and share our fourth quarter earnings, and then
• 4:13
  Speaker 4: we just quickly saw some changes like everyone else is
• 4:16
  Speaker 4: quoting and like everybody else is seeing, right, both retail
• 4:19
  Speaker 4: restaurants and just really concerns over tariffs, concerns over what
• 4:22
  Speaker 4: does that mean for our business? And then you have
• 4:24
  Speaker 4: eggs for us, right, so you have flu weather, tariffs.
• 4:28
  Speaker 4: You know, consumer just just feeling a little bit overwhelmed perhaps,
• 4:31
  Speaker 4: And now I think it's just because it's not clear, right,
• 4:33
  Speaker 4: things just aren't clear where they're going to settle out right.
• 4:36
  Speaker 4: Is it going to sound really aggressive on tariffs and
• 4:38
  Speaker 4: it's going to call it'll dial back all politics aside?
• 4:41
  Speaker 4: You just can't you can't tell yet where it'll land.
• 4:43
  Speaker 4: And that just causes confusion for a lot of people,
• 4:46
  Speaker 4: confusion for consumers.
• 4:48
  Speaker 3: You add eggs to it, and you just get a
• 4:49
  Speaker 3: really you just get.
• 4:51
  Speaker 4: A whole bunch of things that are headwinds for us
• 4:54
  Speaker 4: and again for the industry because we can see it.
• 4:56
  Speaker 3: We can see it everywhere like I know you see it.
• 4:58
  Speaker 3: So yeah, that's exactly what we are seeing.
• 5:02
  Speaker 4: We're still for us, it's still Look, we've got our playbook,
• 5:05
  Speaker 4: We've got a fiyer strategy we put out for both brands.
• 5:08
  Speaker 4: I love talking about that because we really just feel
• 5:10
  Speaker 4: like heads down pivot where you need to with the
• 5:13
  Speaker 4: consumer and with what we're seeing. And that's what we're doing,
• 5:15
  Speaker 4: but also we've got a great playbook with some great
• 5:18
  Speaker 4: strategies and initiatives that we still think can pay.
• 5:20
  Speaker 3: Often, Like you, we think it'll get better throughout the year.
• 5:23
  Speaker 4: It's just about kind of everybody settling down and really
• 5:26
  Speaker 4: being able to understand what's going to happen.
• 5:29
  Speaker 1: Yeah, for sure.
• 5:30
  Speaker 2: Something interesting I heard today on the Cracker Barrel call
• 5:34
  Speaker 2: was that it was more broad based as opposed to
• 5:37
  Speaker 2: just the low income consumer.
• 5:39
  Speaker 3: I think it is broad based.
• 5:40
  Speaker 4: Obviously, everyone knows as a brand and in family dining
• 5:43
  Speaker 4: we all skew, no matter which big brand, we skew
• 5:47
  Speaker 4: a little more towards the lower end end consumers. That's
• 5:50
  Speaker 4: true for us, although we have a very wide, wide
• 5:53
  Speaker 4: swath of consumer demographics when we talk about it, but
• 5:57
  Speaker 4: I do think it's a little more widespread. So what
• 5:58
  Speaker 4: we're seeing is, you know, attachment rates. We talked about
• 6:02
  Speaker 4: this on our call. We see attachment rates down, and
• 6:04
  Speaker 4: yet the check there's still premium items that we merchandise
• 6:09
  Speaker 4: in the restaurant. So are Barbell strategy intact and yet
• 6:12
  Speaker 4: you see attachment rates move a little bit.
• 6:14
  Speaker 3: I think there were others.
• 6:15
  Speaker 4: That quoted that as well, and I think that's a
• 6:16
  Speaker 4: way of just managing your check in a time of
• 6:20
  Speaker 4: this kind of uncertainty, like we've mentioned already.
• 6:23
  Speaker 1: Yeah, for sure.
• 6:24
  Speaker 2: And I guess last one on this and then we'll
• 6:26
  Speaker 2: get more into into your plans. You know, I'm trying
• 6:29
  Speaker 2: to do a little homework for myself here, so it's
• 6:32
  Speaker 2: good to have you here to pick your brain. But
• 6:34
  Speaker 2: you mentioned on the fourth quarter call, Texas, Arizona we're
• 6:37
  Speaker 2: seeing the biggest pullback. Some cell side analysts, from what
• 6:40
  Speaker 2: I've heard, surmised it could be due to the new
• 6:42
  Speaker 2: administration's policy on immigration. But how did those states fare
• 6:46
  Speaker 2: in November and December?
• 6:49
  Speaker 4: So they they were they were probably still the weaker.
• 6:52
  Speaker 4: They were a little bit weaker. Again, you've got to
• 6:55
  Speaker 4: peel out hurricanes, peel out whether you know in the
• 6:59
  Speaker 4: other the other the East Coast and the West coast,
• 7:01
  Speaker 4: as we already discussed two.
• 7:02
  Speaker 3: But I think they were a little bit weaker.
• 7:03
  Speaker 4: But the gap widens pretty big starting in the new year.
• 7:06
  Speaker 4: It started in twenty five, we really started to see
• 7:08
  Speaker 4: that gap widening. And I've said this before, We've said
• 7:11
  Speaker 4: it on the calls, but honestly, California has responded pretty well.
• 7:14
  Speaker 4: To two four six eight and the value offerings there
• 7:17
  Speaker 4: and everything we've been doing, we still see some strength there.
• 7:21
  Speaker 4: And then we're finally talking about strength in a market
• 7:23
  Speaker 4: like Florida again, which that wasn't the case even a
• 7:26
  Speaker 4: year ago. Right, So we're starting to see a bit
• 7:28
  Speaker 4: more of a bifurcation with those two states showing a
• 7:32
  Speaker 4: little bit more momentum.
• 7:35
  Speaker 2: Okay, great, and that actually is a great segue into
• 7:38
  Speaker 2: the two four to sixty eight value menu. It did
• 7:42
  Speaker 2: really well for Denny's, you know, going back coming out
• 7:45
  Speaker 2: of the great recession, you know. And it's an example
• 7:49
  Speaker 2: I point to point to a lot just when I
• 7:52
  Speaker 2: talk historically about the business and everyday value versus discounting,
• 7:55
  Speaker 2: and I talked about Denny's versus Bob Evans at the
• 7:57
  Speaker 2: time and a huge difference in perform Rmans, right, And
• 8:00
  Speaker 2: so I thought it was a great idea of bringing
• 8:03
  Speaker 2: it back. How's it doing so far?
• 8:05
  Speaker 4: Yeah, it's doing well. So lots of noise, but what
• 8:08
  Speaker 4: we can see when we launched it, and we tested
• 8:09
  Speaker 4: before we launched it, we re engineered it.
• 8:11
  Speaker 3: We've talked about this. We basically just really looked and
• 8:14
  Speaker 3: worked hard to make it work.
• 8:16
  Speaker 4: For today, right, It was a promotion to your point
• 8:18
  Speaker 4: that started and think two thousand and ten, right twenty ten.
• 8:22
  Speaker 3: So it's a decade long promotion that at the.
• 8:25
  Speaker 4: Beginning of the pandemic was changed and kind of pulled
• 8:28
  Speaker 4: off of the menu. And I firmly believe that people
• 8:31
  Speaker 4: need to count on count on brands for great a
• 8:34
  Speaker 4: great value proposition. But when you're Denny's, right, and we
• 8:37
  Speaker 4: are America's diner for today's America, we really got to
• 8:40
  Speaker 4: meet consumers where they are.
• 8:41
  Speaker 3: And for us, it was critical we.
• 8:43
  Speaker 4: Bring back a fan favorite like two four, six eight
• 8:46
  Speaker 4: put concept sort, you know, put all sorts of ideas
• 8:48
  Speaker 4: in a concept sort. And clearly that one in our research,
• 8:51
  Speaker 4: you know, still was at the top. So we went
• 8:53
  Speaker 4: to our franchisees, talked long and hard about it, tested it.
• 8:56
  Speaker 4: So how do we make this relevant for today a
• 8:58
  Speaker 4: decade later? And we re engineered to in a way
• 9:01
  Speaker 4: that really does help protect profitability and adding we had
• 9:05
  Speaker 4: the two in the four dollar categories that are add on,
• 9:07
  Speaker 4: so you've got to you've got to order an entree
• 9:09
  Speaker 4: to get that add on that is protecting things as well.
• 9:11
  Speaker 4: And then we've added a ten dollar category also and
• 9:15
  Speaker 4: that lots of people were quoting back two for six
• 9:17
  Speaker 4: eight ten.
• 9:17
  Speaker 3: I'm like, no, just two four six eight two four
• 9:20
  Speaker 3: six eight.
• 9:20
  Speaker 4: But there are some ten dollars options that come with
• 9:22
  Speaker 4: that menu when that menu is dropped in front of you.
• 9:24
  Speaker 3: So we feel really good about what we're seeing.
• 9:27
  Speaker 4: We can see, you know, the biggest preference is in
• 9:29
  Speaker 4: the six and the ten dollars category, interestingly enough, and
• 9:32
  Speaker 4: then we see a lot of those add ons in
• 9:33
  Speaker 4: the two and the four dollars category as well. Again,
• 9:36
  Speaker 4: I mentioned doing well in California for us, and then
• 9:38
  Speaker 4: barring any of this other kind of external noise, it's
• 9:42
  Speaker 4: been working really well for us. So I think you'll
• 9:44
  Speaker 4: see us continue to kind of re engineer that think
• 9:46
  Speaker 4: about what the consumer might need in this moment, and
• 9:49
  Speaker 4: yet still keep that everyday value platform front and center
• 9:53
  Speaker 4: for our guests that want to count on us.
• 9:55
  Speaker 1: Yeah, the two and the four making those add ons
• 9:57
  Speaker 1: I thought was a heady move. Those good.
• 10:00
  Speaker 2: Have you talked about what percentage of sales value items
• 10:03
  Speaker 2: represent and if there's been any change since the menu
• 10:06
  Speaker 2: is relaunched.
• 10:06
  Speaker 4: Since we relaunched it, yeah, I'd say we were in
• 10:08
  Speaker 4: the mid to high teens in terms of mix or
• 10:11
  Speaker 4: incidents or preference, whichever word you want to use. And
• 10:13
  Speaker 4: I think right now we're at about twenty. So we
• 10:15
  Speaker 4: do see we have seen that grow and we feel
• 10:19
  Speaker 4: really good about where we're seeing. You know, like I said,
• 10:22
  Speaker 4: the six and the ten dollar dollar categories being the
• 10:24
  Speaker 4: really over indexing there and satisfaction scores, excitement around bringing
• 10:29
  Speaker 4: it back, and we know it's got legs and momentum.
• 10:31
  Speaker 4: You'll see us continue to innovate around what it looks
• 10:33
  Speaker 4: like right what kind of new things we might bring
• 10:35
  Speaker 4: in that platform?
• 10:37
  Speaker 1: Great, what kind of lift do you see in with
• 10:39
  Speaker 1: the remodels.
• 10:40
  Speaker 3: Remodels are doing really well.
• 10:42
  Speaker 4: It's called Diner two point zero, so it's this kind
• 10:44
  Speaker 4: of modern version of America's diner. And we took the
• 10:47
  Speaker 4: best of the previous remodel that wasn't very old. Actually
• 10:51
  Speaker 4: I've only been in place for a year or so.
• 10:53
  Speaker 4: That was called Heritage two point zero, and we took
• 10:55
  Speaker 4: that and then we put in a few more went
• 10:58
  Speaker 4: to guests, went to consumers, does it feel when you're here?
• 11:01
  Speaker 4: And we lightened it up, brightened it up a little bit,
• 11:03
  Speaker 4: and actually put a few more diner esque cues in it.
• 11:06
  Speaker 4: We are America's diners, so we put a few more
• 11:09
  Speaker 4: diner sques in place to really resonate and even just
• 11:12
  Speaker 4: brighten up the image. So six and a half percent lift,
• 11:15
  Speaker 4: we're seeing traffic sales six four I mean it's roughly
• 11:18
  Speaker 4: the same.
• 11:19
  Speaker 3: But over six percent. We're thrilled about that.
• 11:21
  Speaker 4: And actually we're really excited about the conversations we've been
• 11:24
  Speaker 4: having with franchisees and a stimulus package kind of leveraging
• 11:27
  Speaker 4: our balance sheet and leveraging you know, what we can
• 11:30
  Speaker 4: do our strength in terms of what we can do
• 11:32
  Speaker 4: to help them. So we've reintroduced different stimulus programs. We've
• 11:36
  Speaker 4: often done that, and historically I've always tried to say,
• 11:38
  Speaker 4: we understand, we want the investment in our and improving
• 11:42
  Speaker 4: our assets, and yet we understand, we understand, you know
• 11:45
  Speaker 4: what it looks like for profitability and strengthening those franchisees
• 11:49
  Speaker 4: business models.
• 11:50
  Speaker 3: So the stimulus package and the.
• 11:51
  Speaker 4: Things we're doing for them, we really are pretty excited
• 11:54
  Speaker 4: about the momentum and how many remodels we can do
• 11:56
  Speaker 4: this year. We're really excited about that.
• 11:59
  Speaker 2: Great. You're making some changes to the loyalty program as well.
• 12:02
  Speaker 3: Correct absolutely so. You know I've said this before.
• 12:05
  Speaker 4: We have a decent database with a good amount of
• 12:08
  Speaker 4: people in our database, but making it a best in
• 12:11
  Speaker 4: class consumer friendly, really one to one marketing personalized journeys
• 12:17
  Speaker 4: and really moving it from where it is today with
• 12:20
  Speaker 4: a database and a lot of offers going into the
• 12:22
  Speaker 4: database and lots of consumers that response, moving it to
• 12:25
  Speaker 4: truly a CRM loyalty program with rewards.
• 12:28
  Speaker 3: We're amping it up.
• 12:29
  Speaker 4: We've invested heavily in a team, a team that has
• 12:32
  Speaker 4: done this before, a team that's created these best in
• 12:34
  Speaker 4: class class programs rather.
• 12:36
  Speaker 3: And it's coming to fruition. It'll be right now.
• 12:39
  Speaker 4: Back half of the year is when we know that
• 12:41
  Speaker 4: that full scale launch will happen. But lots of work
• 12:44
  Speaker 4: going on and lots of things that we're able to
• 12:46
  Speaker 4: do right now just to kind of kick the tires
• 12:48
  Speaker 4: on this new approach to it, and we're absolutely thrilled
• 12:51
  Speaker 4: about what we'll be able to do soon.
• 12:53
  Speaker 2: Okay, cool, you closed a bunch of units. I think
• 12:56
  Speaker 2: it was eighty eight and twenty twenty four.
• 12:59
  Speaker 1: Exploct to close some more or Dick year is this
• 13:01
  Speaker 1: going to be?
• 13:02
  Speaker 4: You know?
• 13:02
  Speaker 2: I saw they were very low volume stores. Now one
• 13:04
  Speaker 2: point one million AUVs. Is this going to be the
• 13:07
  Speaker 2: last year of the outside store closures.
• 13:10
  Speaker 3: So that the outside store closures.
• 13:12
  Speaker 4: I love how you said that, right, because this is
• 13:14
  Speaker 4: a brand that and like any other brand, you're always
• 13:17
  Speaker 4: kind of working to call working to you know, prune,
• 13:20
  Speaker 4: and that had always been the case prior to the
• 13:22
  Speaker 4: pandemic for the brand one to two percent, right, and
• 13:25
  Speaker 4: usually in a net positive position. Pandemic for everybody kind
• 13:28
  Speaker 4: of reset things, and I called a reset.
• 13:30
  Speaker 3: I haven't necessarily though.
• 13:31
  Speaker 4: We talked about transformative thinking at Denny's in our strategy
• 13:35
  Speaker 4: Rise of a New Day. When we brought that to
• 13:37
  Speaker 4: investors in our five year roadmap, we were very clear
• 13:40
  Speaker 4: about this is what it's going to take to just
• 13:41
  Speaker 4: reset and get us back to net growth.
• 13:44
  Speaker 3: That's the goal, get us back.
• 13:45
  Speaker 4: To growing the Denny's brand like we had been doing historically.
• 13:48
  Speaker 4: And so for us, that fife fifty is total. It
• 13:52
  Speaker 4: was about last year in twenty four it was eighty seven.
• 13:55
  Speaker 4: You might have eighty eight, right, I think it was
• 13:56
  Speaker 4: eighty seven, but you're so closed. And then this year
• 13:59
  Speaker 4: we've guided to arrange that is about the same, and
• 14:03
  Speaker 4: that guidance is about saying yes, we will rip that
• 14:06
  Speaker 4: band aid off if you will, to strengthen the rest
• 14:08
  Speaker 4: of the portfolio and help strengthen our franchise. These models,
• 14:11
  Speaker 4: and we know what this can do for us. We've
• 14:13
  Speaker 4: also talked about and have been very overt about saying
• 14:17
  Speaker 4: for us, it's a path to creating greater AUVs and
• 14:20
  Speaker 4: a stronger portfolio for the whole brand. Right now, one
• 14:23
  Speaker 4: eight we open new is the average unitt bonds. One
• 14:27
  Speaker 4: eight we open new locations, Michael, and they're two two,
• 14:30
  Speaker 4: two three and sometimes even higher. So culling that bottom
• 14:34
  Speaker 4: and then again really working the strength of portfolio. We've
• 14:38
  Speaker 4: said we want to go from one eight to two
• 14:40
  Speaker 4: two in a five year timeframe, and that's what we
• 14:42
  Speaker 4: laid out in our model, in our long term roadmap.
• 14:45
  Speaker 3: And that's that's a quarter of it.
• 14:47
  Speaker 4: It's twenty five percent of it really because of what
• 14:49
  Speaker 4: it will do to increase sales and increase the AUVs,
• 14:53
  Speaker 4: because of those under you know, just under their lower volume,
• 14:56
  Speaker 4: and it makes some changes there. This was a long
• 15:00
  Speaker 4: path to get there and to announce it well underway,
• 15:04
  Speaker 4: you know, earlier in the twenty three into twenty twenty
• 15:07
  Speaker 4: three and conversations with franchisees about what does this do
• 15:10
  Speaker 4: for the health of your business? No one likes doing closures.
• 15:14
  Speaker 4: It's the only thing talked about when we talk. And
• 15:17
  Speaker 4: I can't wait till we get to the other side,
• 15:18
  Speaker 4: because we will, and we'll show the strength of the
• 15:21
  Speaker 4: Denny's brand again and getting to modest growth, but getting
• 15:24
  Speaker 4: to growth, net growth by twenty six. So will there
• 15:27
  Speaker 4: be some after twenty five, sure, but it will. It
• 15:30
  Speaker 4: is about you will see us in a net growth
• 15:32
  Speaker 4: environment by twenty twenty six.
• 15:33
  Speaker 3: DESTI goal.
• 15:35
  Speaker 2: Yeah, it's been ten years since I covered Denny's, almost
• 15:39
  Speaker 2: eleven now, but yeah, I remember John Miller telling me that, like,
• 15:42
  Speaker 2: you know, for a brand of that's been around as
• 15:45
  Speaker 2: long as Denny's, two percent a year was pretty much
• 15:47
  Speaker 2: standard operating rights seizure.
• 15:50
  Speaker 1: Right, Okay, cool. Do you expect to get a seam
• 15:54
  Speaker 1: store sales boosts to share from the closures?
• 15:57
  Speaker 3: Oh, that's a that's a good question.
• 16:01
  Speaker 4: I do expect it. Where it really depends on where
• 16:03
  Speaker 4: those end up happening. And we obviously have that roadmap
• 16:06
  Speaker 4: in front of us and have that physical map, but.
• 16:08
  Speaker 3: There's still probably still too soon to.
• 16:10
  Speaker 4: Tell that immediate in twenty five, you know, change or
• 16:13
  Speaker 4: delta there just given. Is it a high density market,
• 16:16
  Speaker 4: is it not? Is it closing because the trade area
• 16:20
  Speaker 4: moved on us?
• 16:21
  Speaker 3: Or is it a least situation? So it's all those things, right.
• 16:24
  Speaker 4: The analysis shows us that it's one of four or
• 16:27
  Speaker 4: five different things that could be a reason, so hard
• 16:30
  Speaker 4: to say.
• 16:31
  Speaker 2: Hard to say yet, Kiki's expansion is pretty robust.
• 16:35
  Speaker 1: Can you talk about AUV.
• 16:36
  Speaker 2: Restaurant level margin, cash on cash returns, any other unit
• 16:40
  Speaker 2: economic data you can share there.
• 16:41
  Speaker 4: Yeah, So we've been talking a little bit more, you know,
• 16:44
  Speaker 4: as of late about some of those things, and we
• 16:46
  Speaker 4: are really excited. So to capsize the growth, the aggressive
• 16:49
  Speaker 4: growth gone from one to seven states. They did that
• 16:52
  Speaker 4: almost overnight. I'm super proud of the Kiki's team led
• 16:56
  Speaker 4: by Dave Schmidt, formerly of Bloomin Brands, so he's got
• 16:59
  Speaker 4: great experience from the portfolio perspective. I worked with them
• 17:02
  Speaker 4: for a brief stint and bringing them over. He's the
• 17:04
  Speaker 4: right leader for this brand and they've done amazing things.
• 17:06
  Speaker 4: So that one to one to six happened in about
• 17:09
  Speaker 4: seven weeks in the fourth quarter. They are now soon
• 17:12
  Speaker 4: going to be taking vacations late late March April, but
• 17:15
  Speaker 4: they going from one.
• 17:17
  Speaker 3: The seventh state was Georgia, was an existing Kiki's franchise.
• 17:21
  Speaker 3: So it's been rapid growth.
• 17:23
  Speaker 4: Spent a lot of time integrating a bit of time
• 17:25
  Speaker 4: early on integrating it into our systems, making sure that
• 17:28
  Speaker 4: we really understood the brand because it's a unique brand
• 17:30
  Speaker 4: that had never gotten outside of Florida. Founder led so
• 17:33
  Speaker 4: in that case really had to put a lot of
• 17:36
  Speaker 4: you had to put some place, if you will. And
• 17:39
  Speaker 4: having done that now we've been really.
• 17:42
  Speaker 3: Really focused on the growth and really really pleased.
• 17:45
  Speaker 4: So the AAVs they're greater outside of Florida than actually
• 17:50
  Speaker 4: what they were.
• 17:50
  Speaker 3: When we purchased it.
• 17:51
  Speaker 4: So we're really excited about that for Tennessee, Vegas, California,
• 17:56
  Speaker 4: and Colorado. Dallas is now open and there's lots of
• 17:59
  Speaker 4: locations Dell so two million AUVs on average, and excited
• 18:04
  Speaker 4: about that trajectory.
• 18:05
  Speaker 3: It's got a great ramp up period.
• 18:06
  Speaker 4: All my experience in the industry with openings was they open,
• 18:10
  Speaker 4: especially if you have a well known brand, they open
• 18:12
  Speaker 4: and it trails off twenty eight percent or so.
• 18:14
  Speaker 3: Maybe thirty. It just depends.
• 18:16
  Speaker 4: This brand grows because it's seen as still I think
• 18:19
  Speaker 4: that unique. I don't know if I don't know necessarily
• 18:21
  Speaker 4: who Kiki's is. A lot of people will stop me
• 18:23
  Speaker 4: when I'm in the locations. A lot of people stop
• 18:25
  Speaker 4: me and say, I've never heard of this, right, likely
• 18:29
  Speaker 4: that you haven't, but they rave about what they got.
• 18:32
  Speaker 4: We've obviously got a brand new design and lots of
• 18:34
  Speaker 4: new elements, so it's really pretty cool. Mid teens margins
• 18:38
  Speaker 4: is what we're targeting after the ramp up period. The
• 18:41
  Speaker 4: build out costs a million and a half. They're inline
• 18:44
  Speaker 4: and almost all cases they're inline, so that's exciting because there's.
• 18:47
  Speaker 3: A four to five year cash on cash return. So
• 18:50
  Speaker 3: thrilled about it. Seven and a half.
• 18:51
  Speaker 4: Hours, very different from our mostly twenty four hour brand
• 18:54
  Speaker 4: at Denny's. We've had lots of excitement from Denny's franchisees.
• 18:58
  Speaker 4: Kiki's franchisees are awesome because this was a franchise brand.
• 19:01
  Speaker 4: That was what was attractive about it and why this
• 19:04
  Speaker 4: really from a strategic standpoint, made a lot of sense.
• 19:06
  Speaker 4: So excited about the growth of Kiki's, excited about going
• 19:10
  Speaker 4: to new markets. I would also have to add that
• 19:12
  Speaker 4: we stole share in the fourth quorter in the Florida market,
• 19:15
  Speaker 4: but we absolutely did. We were positive three percent and
• 19:19
  Speaker 4: created some momentum in that fourth quorter doing things like
• 19:23
  Speaker 4: new marketing and local store marketing, but having presence and
• 19:27
  Speaker 4: working on the website that didn't exist before. I'm working
• 19:30
  Speaker 4: on and having off premise and OLO in our locations
• 19:34
  Speaker 4: right which is nearly complete. But those things weren't in place,
• 19:37
  Speaker 4: and there was really no off premise business. Now it's
• 19:39
  Speaker 4: a good part of what we're doing. So really thrilled
• 19:42
  Speaker 4: that all those things were put in place in the
• 19:45
  Speaker 4: last year and a half and then solidified in that fourth.
• 19:48
  Speaker 3: Quarter and then we started to see the momentum three percent.
• 19:50
  Speaker 4: If it had not been for the hurricane, the hurricane
• 19:52
  Speaker 4: attributed we think one hundred and ten basis points drag,
• 19:57
  Speaker 4: so could do the math and that would have been
• 19:59
  Speaker 4: a really st out order for the Kiki's brand.
• 20:03
  Speaker 2: That's great, and I love that one shift model. I mean,
• 20:05
  Speaker 2: I'm sure turnover is much cheaper, much better. It's uh,
• 20:09
  Speaker 2: you don't have to worry about, you know, spending more
• 20:11
  Speaker 2: on late shift employees and all that kind of stuff.
• 20:18
  Speaker 2: How many of the twenty twenty five units are going
• 20:20
  Speaker 2: to be developed in new markets versus you know, in
• 20:23
  Speaker 2: field of existing ones.
• 20:25
  Speaker 3: We've got a couple other states lined up.
• 20:28
  Speaker 4: We haven't put them on the website and haven't announced
• 20:30
  Speaker 4: them yet, but there's definitely a few more states you'll
• 20:34
  Speaker 4: see us expand too, and probably be out with that soon.
• 20:39
  Speaker 1: Okay, cool?
• 20:39
  Speaker 2: And what percentage of the new units are opened by
• 20:41
  Speaker 2: existing kikiS franchisees.
• 20:44
  Speaker 3: Good question.
• 20:46
  Speaker 4: So we've got some being opened, some were opening ourselves,
• 20:50
  Speaker 4: seeding feach strategy, working to refranchise them as soon as possible.
• 20:53
  Speaker 4: But in this environment, what we've learned and talking to
• 20:56
  Speaker 4: our franchisees for both brands, the build out costs and
• 20:59
  Speaker 4: the things, if there's if there's a scale that we
• 21:01
  Speaker 4: can leverage to get them open and then turn the
• 21:03
  Speaker 4: keys over, that's what we'll do. So you'll also see
• 21:06
  Speaker 4: us pretty quickly work to refranchise some markets. Dallas is
• 21:08
  Speaker 4: a company will market as we speak today, and so
• 21:12
  Speaker 4: so's Tennessee.
• 21:13
  Speaker 3: Right.
• 21:13
  Speaker 4: So we've been pretty overt about kind of leveraging our
• 21:16
  Speaker 4: balance sheet to do that as well in our cash
• 21:18
  Speaker 4: but you'll see us you'll move that. So what our
• 21:21
  Speaker 4: Keiky's franchises would be a small percentage because the percentages
• 21:23
  Speaker 4: are you know, the amount of locations is getting bigger.
• 21:25
  Speaker 3: So a handful of Kiki's franchises will open.
• 21:28
  Speaker 4: We'll do a couple more company markets and open up
• 21:31
  Speaker 4: a company market only to hopefully flip them and have
• 21:34
  Speaker 4: people lined up to.
• 21:35
  Speaker 3: Do that.
• 21:36
  Speaker 4: We're having conversations with right now. So and then Denny's franchisees.
• 21:39
  Speaker 4: There's a small handful of Denny's franchise is ready to
• 21:42
  Speaker 4: go this year.
• 21:42
  Speaker 2: Also, Okay, great, and you mentioned the seed and feed strategy.
• 21:46
  Speaker 2: You know, long term, what do you think the right
• 21:48
  Speaker 2: mix of company versus franchise?
• 21:50
  Speaker 3: Yeah, great question, Michael.
• 21:51
  Speaker 4: We talked about it a lot right when we when
• 21:53
  Speaker 4: we acquire the brand, talking about eighty five fifteen and
• 21:57
  Speaker 4: right now, obviously it's a little greater company.
• 22:00
  Speaker 3: We still want to be eighty five fifteen ninety ten.
• 22:03
  Speaker 4: We want to keep them as many asset light you know,
• 22:06
  Speaker 4: brands would say heavily franchised. You want to keep a
• 22:10
  Speaker 4: handful to be smart and still be in the game.
• 22:13
  Speaker 4: I'm an operator and hearts and by trade. So you
• 22:17
  Speaker 4: want to be in there and in it with them
• 22:19
  Speaker 4: and have skin in the game. And you want to
• 22:20
  Speaker 4: be able to have a place where you can test
• 22:22
  Speaker 4: crazy stuff. So we'll have a handful, but the goal
• 22:24
  Speaker 4: is really to get it to be just like Denny's,
• 22:27
  Speaker 4: you know, as many franchise locations be asset light leverage
• 22:30
  Speaker 4: our approach to franchising, you know. So we'll get back
• 22:33
  Speaker 4: to that, and we'll get back to it as soon
• 22:35
  Speaker 4: as we can. We just we really wanted to get
• 22:37
  Speaker 4: some markets open and establish that presence and that's really
• 22:40
  Speaker 4: working for us right now.
• 22:41
  Speaker 2: All right, good stuff, and where's that cash going to go?
• 22:44
  Speaker 2: Is that going to go back to buying shares already
• 22:46
  Speaker 2: that yeah.
• 22:47
  Speaker 4: Yes, yes, So back to buying shares back to again,
• 22:50
  Speaker 4: whether it's stimulus package or things that we're able to
• 22:52
  Speaker 4: do to help our franchise ease, get that flyweel turning,
• 22:55
  Speaker 4: get those remodels going, and because we know the lift
• 22:58
  Speaker 4: that comes with that. We're still in the sting in
• 23:00
  Speaker 4: technology with both I mentioned our CRM loyalty program, but
• 23:04
  Speaker 4: also Xenial. You know, our company operations have the new
• 23:08
  Speaker 4: POS platform, cloud based handheld order taking things like that,
• 23:12
  Speaker 4: so that rollout's happening as well, so we'll leverage it
• 23:16
  Speaker 4: to be great stewards of our business. We'll leverage it
• 23:18
  Speaker 4: to continue investing in media, marketing, food. But also, yes,
• 23:22
  Speaker 4: buying back shares is a critical part of our It's
• 23:24
  Speaker 4: an important part of our strategy to be consistently in
• 23:26
  Speaker 4: the market buying back shares, and we are not precluded
• 23:30
  Speaker 4: from doing that while we do the seed and feed strategy.
• 23:32
  Speaker 3: That's the good news.
• 23:34
  Speaker 2: Okay, great, And recently there were two permanent closures. You know,
• 23:38
  Speaker 2: when were those stores opened? And and have you been
• 23:41
  Speaker 2: making refinements to your site selection tools since then?
• 23:45
  Speaker 4: Are you're referring to the Kikey's locations chacki Keys?
• 23:49
  Speaker 3: Yeah, Yeah, So that was.
• 23:50
  Speaker 4: An it's an interesting situation where we were able to
• 23:53
  Speaker 4: exercise our rights and go in and help out with
• 23:55
  Speaker 4: a franchisea that was struggling. So we've pretty much what
• 23:58
  Speaker 4: we've said about that. It really wasn't so it wasn't
• 24:01
  Speaker 4: something we had opened. It was something that existed long before.
• 24:04
  Speaker 4: But we also know we'll be able to we'll be
• 24:06
  Speaker 4: able to flip that, we'll be able to to to
• 24:09
  Speaker 4: be able to really work with with what we've got
• 24:11
  Speaker 4: and then they're good locations, they were good performing locations.
• 24:15
  Speaker 4: Really was just about exercising our rights, do the best
• 24:17
  Speaker 4: thing for the brand, the team, that location, those locations,
• 24:20
  Speaker 4: et cetera. So you'll see more from us on that
• 24:22
  Speaker 4: going forward.
• 24:24
  Speaker 1: Okay, great, So what's your favorite Denny's order?
• 24:28
  Speaker 3: Oh?
• 24:29
  Speaker 4: My Denny's order since I was you know, I don't
• 24:31
  Speaker 4: know ten Moon's over Miammi.
• 24:34
  Speaker 3: Superbirds a close second for me. And uh and then
• 24:37
  Speaker 3: when I'm being really good, you know, I do the
• 24:38
  Speaker 3: Fit Slam, So how many times.
• 24:42
  Speaker 4: That week or how much travel I'm doing, But Moon's
• 24:43
  Speaker 4: over Miami can't go wrong with that.
• 24:45
  Speaker 3: It's just fabulous.
• 24:47
  Speaker 4: Yeah.
• 24:48
  Speaker 2: Yeah, I've gone with the Moons over Miami omelet before
• 24:51
  Speaker 2: the Grand Slam's great Santa Fe skill.
• 24:53
  Speaker 1: It's great.
• 24:54
  Speaker 2: I think next time I show up, I think I'm
• 24:55
  Speaker 2: going to try that Philly cheese cheese steak ommelet.
• 24:58
  Speaker 1: I don't think I've had that one yet.
• 24:59
  Speaker 3: We've got some great skillets out. Sounds like you had
• 25:01
  Speaker 3: that one, But there's some really great skillets out right now.
• 25:03
  Speaker 3: They're they're they're they're awesome. Our burgers shakes, unbelievable quality
• 25:09
  Speaker 3: and just craveable.
• 25:10
  Speaker 4: We launched a with the Beatle Juice August September time
• 25:15
  Speaker 4: frame when that came out.
• 25:16
  Speaker 3: That movie came out and we launched a Beatle Juicy Burger.
• 25:18
  Speaker 4: So we created this Triple Patty Burger and it went crazy,
• 25:21
  Speaker 4: right Beatle Juicy Burger launched it with the integration of
• 25:24
  Speaker 4: the movie.
• 25:24
  Speaker 3: And that's now permanently on the menu.
• 25:26
  Speaker 4: So the next time you go, you got to look
• 25:28
  Speaker 4: at the the the triple Patty Burger that's on the
• 25:32
  Speaker 4: menu now.
• 25:32
  Speaker 3: It's phenomenon Triple Patty Bakerberger.
• 25:35
  Speaker 1: Yeah, good stuff. You're making me hungry.
• 25:39
  Speaker 2: All right, thanks for doing this. Where can our listeners
• 25:41
  Speaker 2: go to find their closest Denny's And which social.
• 25:43
  Speaker 1: Media channel should we be following the chain on?
• 25:46
  Speaker 4: You should follow us wherever you can ye Denny's dot
• 25:49
  Speaker 4: com to find your local Denny's, Denny's on demand to.
• 25:53
  Speaker 3: Find your off premise order and order your your.
• 25:55
  Speaker 4: Denny's online and then yeah, social pages all though usual
• 25:59
  Speaker 4: on Twitter, Facebook, Big can follow me on LinkedIn. I'm
• 26:02
  Speaker 4: always talking about the great things that we're doing and
• 26:04
  Speaker 4: really proud of the fact that when needed, we're out
• 26:07
  Speaker 4: there across the country helping guests, helping consumers with our
• 26:10
  Speaker 4: mobile relief diner and just trying to do good wherever
• 26:12
  Speaker 4: we can. So yeah, you can find us doing good
• 26:14
  Speaker 4: things in the world at the same time. So come
• 26:17
  Speaker 4: see us, come see us anywhere.
• 26:19
  Speaker 1: Love it.
• 26:20
  Speaker 2: I want to thank the audience for tuning in. If
• 26:21
  Speaker 2: you liked our discussion, please leave us a review. Check
• 26:24
  Speaker 2: back soon for an interview with Noah Glass, the founder
• 26:26
  Speaker 2: and CEO of OLO