Denny’s surges on plan to sell company-owned stores to franchisees

Denny’s

• Denny’s on Tuesday said it will sell some of its company-operated restaurants to franchisees as part of its refranchising and development strategy.
• Shares soared 25% following the news, hitting a 52-week high of $18.16 apiece.
• The company’s third-quarter financial results missed both on the top and bottom lines.
• Watch Denny’s trade in real time here.

Denny’s shares soared 25% Wednesday, hitting a 52-week high of $18.16 apiece, after the restaurant chain said it will sell some of its company-operated restaurants to franchisees.

Denny’s management on Tuesday told investors that Denny’s intends to sell between 90 and 125 company-operated restaurants in the next 18 months in order to make it a purer franchised brand. Currently, a total of 90% Denny’s restaurants are owned by franchisees and the company said it wants that number to be between 95% and 97%.

Management added that it expects to earn about $30 million from selling up to 30% of the 95 properties it owns, and the proceeds will be reallocated towards purchasing higher-quality real estate.

“We look forward to providing an opportunity for development-focused franchisees to expand their businesses while also attracting and welcoming new, well-capitalized franchisees into the Denny’s family,” CEO John Miller said during the company’s third-quarter earnings call on Tuesday. 

“Our refranchising and development strategy will enable us to further evolve as a franchisor of choice that provides more focused support services, all while yielding a higher quality, more asset-light business model.”

The company’s third-quarter financial results posted on Tuesday were not encouraging. The restaurant chain earned $0.17 a share on $158 million sales, missing both the $0.18 and $159 million that analysts surveyed by Bloomberg were expecting.

Shares were up 30% this year.

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