Same-store sales at Denny’s Corp. company restaurants outperformed franchised units during the first quarter as food delivery at company units drove higher sales among Millennials and late-night diners.
For the first quarter ended March 28, the Spartanburg, S.C.-based family-dining chain reported a 1.5-percent uptick in U.S. systemwide same-store sales. Results were dragged down by a 1.2-percent increase in same-store sales at franchised restaurants in the U.S. By comparison, same-store sales increased 3.2 percent at company locations.
Denny’s CEO John Miller said company units fared better due to multiple partnerships with third-party delivery providers, which are driving incremental sales during late-night hours and among 18- to 34-year-olds.
“We think this is a tailwind for the brand,” Miller said during a Tuesday conference call with investors.
In March, off-premise sales accounted for 9.8 percent of total sales, an increase from 8.7 percent in December. Delivery sales drove the increase.
Miller said franchised units, which represent a majority of Denny’s locations, are slower to adapt to delivery.
Same-store sales also were impacted by weak traffic driven by consumer desire to stay home and diners trading down to value items at fast-food restaurants, he said.
Year over year, sales on value items fell, pushing up average check, but at the “expense of robust traffic,” Miller said.
“We see a little bit of headwind from the QSR value environment persisting in this environment that you would normally think is a tailwind,” he said.
Despite headwinds in the full-service segment, Miller said Denny’s has remained competitive as it continues to age down the brand through remodels, menu tweaks and expanding digital platforms. Roughly 80 percent of restaurants will have the new design image by the end of 2018.
Denny’s reported net income of $9.8 million, an increase from $8.4 million the previous year. Revenue jumped 21.4 percent, to $155.3 million, lifted primarily by strong sales at company restaurants.
Denny’s closed the quarter with 1,724 restaurants.
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