Denny's cancels franchise deal in China

Denny’s Corp. has canceled its plans to develop franchised restaurants in China with Great China International Group, the company said Monday.

Per the now-defunct agreement, announced in July, GCIG would develop 50 new Denny’s locations in southern China during the next 15 years. The first restaurant was expected to open in 2013.

The agreement also gave GCIG exclusive development rights in six Chinese provinces: Guangdong, Fujian, Guizhou, Jiangxi, Chongqing and Sichuan, Denny’s said in a July statement.

Executives at Denny’s were not immediately available to comment on why the agreement with GCIG had been cancelled.

"We have great respect for the varied business interests and capabilities of GCIG and understand their need to focus on other projects,” Steve Dunn, Denny’s senior vice president of global development said in a statement.

In July, Denny’s president and chief executive John Miller noted that the agreement marked the brand's first “major expansion in China.” At the time, he said, the agreement with GCIG was the company’s largest international development agreement to date.

“We continue to believe that Denny's has great potential in the Pacific Rim in general, and China in particular, and are actively seeking development partners who share that vision,” he said in a statement announcing the termination of the agreement. “In 2012, we signed our first development partnership for South America and are looking forward to opening our first location in Chile sometime in the next 12 months, which will help us grow our current base of 98 international restaurants located in nine countries and U.S. territories."

The news comes as Louisville, Ky.-based Yum! Brands Inc. faces difficulties in China. The parent of Taco Bell, Pizza Hut and KFC saw its same-store sales at its 5,400 restaurants in China fall 6 percent during the fourth quarter of 2012. The decrease was due, in part, to negative press surrounding the inspection of Yum’s chicken supply by Chinese officials, the company said.

At the time, Yum told investors that it expected the setback in sales to intensify in China during January and February, leading the company to project a 25-percent decrease in same-store sales for the division during the first quarter. The company said same-store sales likely wouldn’t be positive until the fourth quarter of 2013.

Spartanburg, S.C.-based Denny’s has 1,688 franchised, licensed and company-owned locations systemwide.

Contact Erin Dostal at [email protected].
Follow her on Twitter: @ErinDostal