Denny's Corporation Reports Q1 2025 Financial Results with Revenue Increase but Declining Net Income

Denny's Corporation reported its financial results for the quarter ended March 26, 2025, revealing total operating revenue of $111.6 million, a 1.5% increase from $110.0 million in the same period last year. The company's restaurant sales rose to $53.9 million, up from $52.3 million, while franchise and license revenue remained relatively stable at $57.7 million compared to $57.6 million in the prior year. However, net income significantly declined to $326,000, down from $4.7 million, reflecting a decrease in operating income from $10.0 million to $5.2 million.

The financial performance was impacted by increased costs, with total operating costs and expenses rising to $106.4 million from $100.0 million year-over-year. Notably, costs of company restaurant sales, excluding depreciation and amortization, increased to 92.8% of company restaurant sales, up from 91.9% in the previous year. This rise was attributed to higher product costs, particularly due to increased commodity prices, and higher occupancy costs associated with new restaurant leases. Additionally, the company recorded impairment charges of $3.2 million related to closed franchise restaurants and restructuring costs.

Denny's continues to expand its operations, with a total of 1,557 restaurants as of March 26, 2025, including 1,475 franchised locations and 82 company-operated units. The Keke's Breakfast Café brand, which was acquired in 2024, now comprises 66 restaurants, contributing to the overall growth strategy. The company is also investing approximately $4 million in a new cloud-based restaurant technology platform aimed at enhancing customer experience, with the rollout expected to continue through 2026.

Operationally, Denny's reported a decrease in customer counts, with domestic franchise same-restaurant sales declining by 3.2%. The company’s average unit sales for company-operated restaurants showed a slight increase, but the overall performance was tempered by the reduction in franchise units. The company’s liquidity position remains stable, with net cash provided by operating activities increasing to $5.0 million from $0.2 million in the prior year, although cash flows used in investing activities rose to $7.2 million, primarily due to capital expenditures.

Looking ahead, Denny's management anticipates continued challenges from rising commodity prices and labor costs, but remains optimistic about the potential benefits from its strategic initiatives, including the integration of Keke's and the ongoing technology investments. The company expects to maintain compliance with its financial covenants and aims to leverage its operational efficiencies to improve profitability in the upcoming quarters.