SPARTANBURG, S.C., May 04, 2020 (GLOBE NEWSWIRE) -- Denny’s Corporation (NASDAQ: DENN), franchisor and operator of one of America's largest franchised full-service restaurant chains, today provided a business update on the impact of the COVID-19 pandemic on the Company’s operations and certain other preliminary financial information ahead of its first quarter earnings announcement planned for May 14, 2020.
Business Update
Sales
The COVID-19 pandemic and various related government mandates restricting dine-in restaurant service have continued to disrupt domestic and international operations for Denny’s Corporation and its franchisees. First quarter 2020 domestic system-wide same-store sales1 declined 6.3% as compared to the first quarter of 2019.
Average unit volumes of off-premise sales have grown approximately 107% from February 2020 to April 2020, supported by temporarily waived delivery fees, new “Dine-Thru” curbside service programs, and recently launched shareable family meal packs. As of May 1, 2020, approximately 74% of domestic and international Denny’s restaurants were operating solely or primarily with take-out and delivery options.
Additional training materials have been developed and communicated to the entire system of restaurants in anticipation of dine-in service restrictions starting to ease and additional health and safety measures that will be implemented as they do. These materials remain focused on the safety and wellbeing of guests, restaurant teams, employees and suppliers as Denny’s restaurants prepare for social-distancing standards in their dining rooms.
Franchisee Support
Direct financial relief to Denny’s franchise partners has included: deferral of all remodels until further notice, deferral of royalty and advertising fees for fiscal Week 11 of the 2020 fiscal year, abatement of such fees for fiscal Weeks 12 and 13 of the fiscal year, and a 12-week lease deferral for franchisees operating in properties owned by the Company.
Additionally, the Company has secured rent relief in the form of abatements or deferrals for over 70% of the leases in which the Company is a lessee, including those instances in which the Company subleases to franchisees and will be extending the same relief as a pass through.
Furthermore, the Company has worked closely with key vendors and primary third-party franchise lenders to help secure additional relief on behalf of franchisees. Denny’s franchisees are pursuing available forms of relief under recent federal stimulus programs, and franchisees representing just over half of total domestic franchise restaurants have received funding under the Paycheck Protection Program with additional approvals and funding pending.
Cost Savings Initiatives and Capital Allocation
The Company has implemented cost savings measures, including suspended travel, canceled in-person field meetings, placed holds on all open corporate and field positions, significantly reduced restaurant level staffing across the company portfolio, meaningfully reduced compensation for the Board of Directors and multiple levels of management, and furloughed over 25% of the corporate office. As previously announced, the Company has also suspended share repurchases.
Prior to the end of the quarter ended March 25, 2020, the Company borrowed $40.5 million under its existing revolving credit facility to ensure liquidity as a result of the COVID-19 pandemic. As of March 25, 2020, the Company had approximately $39.2 million of cash and cash equivalents and outstanding borrowing under its revolving credit facility of $318 million, leaving availability of $62.7 million.
Subsequent to the end of the quarter, an additional $20 million was borrowed under its revolving credit facility to ensure additional liquidity. As of May 1, 2020, the Company had approximately $51.1 million of cash and cash equivalents and outstanding borrowing under its revolving credit facility of $338 million, leaving availability of $43.6 million.
For the quarter ended March 25,2020, the Company expects to be in compliance with its financial covenants related to its revolving credit facility but projects that it will not be in compliance with certain financial covenants beginning for the quarter ending June 24, 2020. The Company is in the process of seeking an amendment to its revolving credit facility and currently expects to be able to enter into an amendment on or around May 13, 2020.
About Denny’s
Denny's Corporation is the franchisor and operator of one of America's largest franchised full-service restaurant chains, based on the number of restaurants. As of December 25, 2019, Denny’s had 1,703 franchised, licensed, and company restaurants around the world including 144 restaurants in Canada, Puerto Rico, Mexico, the Philippines, New Zealand, Honduras, the United Arab Emirates, Costa Rica, Guam, Guatemala, the United Kingdom, El Salvador, Aruba, and Indonesia. For further information on Denny's, including news releases, links to SEC filings, and other financial information, please visit the Denny's investor relations website at investor.dennys.com.
