Thursday, February 19, 2009

What happened to Denny's fast-food experiment?

Sometimes what a restaurant company doesn’t tell Wall Street is more interesting than what it trumpets. Yesterday, for instance, Denny’s CEO Nelson Marchioli stressed to financial analysts that “you will see us being more of a player in the to-go and on-the-go side of things,” in part by pushing a new breakfast sandwich. Yet there was no mention during the conference call of Fresh Express, the restaurant-within-a-restaurant that Denny’s developed about a year ago to compete head-to-head with fast-food chains.

Instead, Marchioli indicated that the push for more carryout business will pivot on the Grand Slamwich, a product quietly introduced last year as part of the Fresh Express experiment. The sandwich features egg, breakfast meats and cheese, flavored with about a teaspoonful of maple syrup.

The conference call revealed that Denny’s will mount a big promotional campaign for the Grand Slamwich during 2009. It’s being positioned as a handheld version of the chain’s well-known breakfast platter, the Grand Slam.

Marchioli noted that Denny’s is now reflecting its drive for more to-go business in the designs of stores, but provided no details. Fresh Express was presented as a separate concept, with its own signage, that had been shoehorned into an existing Denny’s. Other stores featured Fresh Express kiosks.

CFO Mark Wolfinger noted that Denny’s units developed under a collaboration with Pilot, the gas-and-go chain, were averaging about $2 million in sales annually, compared with a mean of $1.6 million for the chain as a whole. He said three were currently open, and that some of the 33 Denny’s stores expected to open during 2009 will be on the pad of the convenience centers.

Marchioli observed that late-night service is another niche that makes sense for Denny’s. Until the chain targeted the wee hours of the night as a growth opportunity, he explained, the graveyard shift was “our most challenged day part.” Now, he said, it’s “our best performer.”

Random trivia fact about Marchioli: He’s the only CEO in the industry who rose to that position from a quality-assurance (industry-speak for “food-safety”) background.

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