The 1,500-unit chain is combating sliding customer counts, flat sales and heightened competition with a systemwide pruning, including selling some stores and remodeling others. It's also boosting local ad spending and working hard to include minorities in ads, plus readying a national image campaign set to break in April.
The new initiative comes after one of Denny's toughest years ever.
Seemingly forever haunted by charges of racist policies and attitudes, the chain last July faced a public relations disaster when six black Secret Service agents accused an Annapolis, Md., restaurant of refusing them service. Denny's quieted the situation by signing an agreement with the National Association for the Advancement of Colored People in July.
But still, analysts say the image damage contributed to a 4.1% drop in 1993 customer counts as average unit sales were flat at $1.23 million.
Now with new management in place, Denny's is ready to freshen up its image.
VP-Marketing Nick Castaldo, who signed on in September, said the chain's "whole new look" will be unveiled in Houston next month. He said Denny's is giving the 20 Houston stores a more regional flavor, supported with a print and TV campaign from D'Arcy Masius Benton & Bowles, Greenville, S.C.
Denny's will close the restaurants for roughly a week to overhaul each store's interior. New furniture and lighting fixtures in a different color scheme are on the way, and an updated corporate logo is possible. The restaurants will be customized with regional decor and a new menu featuring local cuisine, Mr. Castaldo said.
The Houston push is only one facet of Denny's plans. Faced with disappointing 1993 results, Flagstar Cos., Denny's Spartanburg, S.C.-based parent, announced in January a restructuring that will result in the sale or possible closing of 135 restaurants in the next 18 months. Most will be sold to franchisees, who will have greater power to regionalize the menu and decor.
Denny's will follow the March unveiling of its Houston stores with a nationwide campaign and a new tagline in April, Mr. Castaldo said. The most recent ad effort, "Denny's asks America," which last year replaced the daffy Corlick sisters campaign, was used in a more localized, promotional manner.
The April ads, which will air in 48 markets, will attempt to incorporate regional promotions into a stronger brand image, said Mark Wilmot, managing director of D'Arcy's Greenville office.
In addition to the $20 million Denny's spends annually with D'Arcy, the restaurant chain in December assigned an additional $5 million campaign to minority agency Glover & Potter, Chicago. The assignment was part of the July agreement with the NAACP.
One of the first spots from Glover, which aired last month during the NAACP "Image Awards" show, featured a young girl dressed up in her mother's clothes and encouraged introducing children to the arts.
Agency President Jim Glover said his staff is working with Denny's to produce a goodwill campaign for February, designated Black History Month, to include newspaper ads and possibly TV spots.
Mr. Wilmot said Denny's is adding minority faces to its general market advertising, too. A D'Arcy commercial that aired last month in four markets shows an older, black chef giving a younger, white trainee cooking tips.
But it wasn't only the racist charges that hurt Denny's traffic last year; analysts say the chain has been losing customers to restaurants with zippier menus.
Denny's has a leading 17% of family dining segment sales, according to Chicago-based consultancy Technomic, and considers other family eateries like Shoney's Restaurants, International House of Pancakes and Perkins Family Restaurants its main competitors. However, more upscale establishments in the casual dining segment are an increasing threat.
"Restaurants like Applebee's [International, a Kansas City, Mo.-based chain] are a little higher-priced than Shoney's or Denny's but with more exciting food," said Dean Haskell, an analyst with Morgan Keegan & Co., Memphis, Tenn.
Douglas Christopher, an analyst with Crowell Weedon & Co., Los Angeles, said Denny's ticket to increased sales lies in better food preparation and presentation. Menu items with more local color could help the nation's No. 12 restaurant chain compete with casual dining operations offering ethnic dishes.