Seeking Alpha

Chapman Matis  

View Chapman Matis' Comments BY TICKER:

  • Denny's Expansion: Middle-Earth And Beyond [View article]
    Interesting article- thanks!

    I think another interesting trend going on at Denny's is the franchising initiative. Denny's established a 100m lending program ( to cut down the number of company-run stores, which have a lower margin, flat s-s-s, and are projected to grow 1-2% less than franchised units. Ever since John Miller became CEO, the ratio of company-run stores to franchised stores has improved. The impact of this can be seen in the company's recent surge in free cash flow and the corresponding decrease in debt levels.
    You bring up a good point about the expansion opportunities, but it is also no coincidence that all 50 units in China and the 10 in Chile are all franchised units, as these stores come online, the number of company-owned loser units will decrease as the company continues its planned re-franchising efforts on the current store base. According to Denny's investor presentations, of all new restaurants opened in the past year, only 1 is company-run. My speculation is that the unit in question is the company's new flagship location on the Vegas Strip, which I don't think is comparable to any other unit across the company, after all, it is the only restaurant the company operates that you can order a Grand Slam and get married in the same half-hour, around the clock.
    I did not know about this Hobbit promotion, do you think it'll be a way to push more expensive, non-2/4/6/8 menu offerings by appealing to LOTR fans? When you speak of Denny's being a "lower point" are you thinking we'll see the same kind of steady push that we saw when Denny's was gradually trekking its way to 5 and change? Thanks again for the great article- Long DENN into earnings at least, got in a while back and might look into some 2.50 may 2013 calls.
    Oct 29, 2012. 07:51 AM | Likes Like |Link to Comment
More on DENN by Chapman Matis