Starting with a single store 80 miles east of Phoenix, Ariz., in 1984, President and CEO Dawn Lafreeda has built Den-Tex Central Inc. into a 75-location chain in Texas, Kansas, Missouri, Oklahoma, Arkansas and Illinois. But her and her family’s relationship with Denny’s goes back even farther.
“I started as a waitress, and my mother was a district manager for Denny’s before I was a waitress,” Lafreeda recalls. “Then myself and a manager friend at Denny’s bought a restaurant together in Globe, Ariz., which was a non-Denny’s. Denny’s had bought a chain of restaurants they were going to convert to Denny’s, but they had one restaurant they didn’t want to convert so they sold it out of the chain to my friend and I.”
Lafreeda still owns that first restaurant, which was called Hobo Joe’s when she and her partner bought it but now is called Judy’s Cookhouse. “Eighteen months later, Denny’s had some stores in west Texas where oil had gone bust, and they wanted owner-operators in the area,” Lafreeda continues. “They said, ‘We have four dog stores in west Texas, do you want to take a crack at them?’ We bought the restaurants in west Texas, and it was a little bit of a culture shock for two Southern California girls so we moved to the next closest big city, San Antonio, and bought a restaurant there. She and I together ended up developing about 13 restaurants, and then I bought her out and continued to grow the company.”
Named Den-Tex Central Inc., the company is the largest Denny’s franchise owned by a single person. “I’ve actually had about 90 Denny’s,” Lafreeda recalls. “Over the years, trade areas change, highways change, leases expire. So I’ve closed several restaurants in my 30 years with Denny’s. Every time a lease is due for renewal or a franchise agreement is set to expire, it’s always a great time to look at your portfolio and see if it makes sense to keep it, close it or remodel it. You evaluate each location as it becomes due. I’ve probably closed 15 Denny’s over the years.”
Sometimes Den-Tex Central maintains an equilibrium, closing two locations and opening two new ones. “I’ve been hovering around 75 for a little while now, maybe a couple years,” Lafreeda says.
Fixed Format
Lafreeda appreciates that Denny’s décor and menus are for the most part set by the company in consultation with franchisees. “A beautiful thing about being part of a franchise group is that a lot of those things are already decided for you,” she points out. “As one of the largest franchisees, I am fortunate that I get to sit on committees and help decide what works and vet out and test proposed ideas, projects and menu items.”
Denny’s has a menu, a sign and a décor package. “It’s pretty much set, and I like that,” Lafreeda concedes. “I like knowing that something is there for me all ready in a kit. I don’t have to put my time and energy into figuring out how to decorate the restaurant or what food I am going to serve or the recipes. It is done for me as part of my franchise agreement. It lets me focus on other things, like buying and building new restaurants and running my business.”
The same is true of the menu. “We can submit requests for regional menu items, and we’ve tested that at various times over the years,” Lafreeda relates. “In Texas, we have tested huevos rancheros and offerings with Hispanic flavorings. Lately, Denny’s menu has been so diverse and so wonderful I haven’t personally gone to any regional menus. Every franchisee gets to make that decision, and it goes through approval by Denny’s. We’re in the middle of the country, and people have pretty consistent taste buds. Texas is a little different. There’s a huge palate for Mexican food. We’ve done things over the years with that, but not too much as of late.”
Den-Tex Central and Denny’s Inc. uses MBM for foodservice delivery to its restaurants. “We want everything to have brand consistency, so when a guest goes into any Denny’s, they get the same quality and are not disappointed,” Lafreeda explains. “It is nice to have multiple locations in a market so as to leverage your buying power a little, but you don’t get as much flexibility there as you get with a national vendor like MBM who delivers to the entire chain. Bread, dairy and produce gets delivered every few days by a local vendor.”
Working in Tandem
Lafreeda has been on the board of the Denny’s Franchisee Association (DFA) for 13 years.
“It represents and protects the interests of the franchisees,” she explains. “We work in tandem with Denny’s corporate. We think about one another, collaborate, share ideas and work on issues that are important to the franchise community and the brand as a whole. We address issues like marketing, development, operations and other topics and concerns we feel need attention, be it margin management, contract negotiations or the flavor of our coffee. We meet with Denny’s corporate minimally once a quarter and are very proactive and collaborative.”
The approach of Denny’s corporate leaders to franchisees has changed over recent years, Lafreeda observes. “Our President and CEO, John Miller is very pro-franchisee, and it has been refreshing,” she says. “He cares about creating value for not only our guests and our shareholders, but also for his franchise partners. There are a lot of issues that come with running a 24-hour, 365-day-a-year brand, and a lot of people to please and listen to, all with different concerns and agendas.
“John has always listened, cared and worked with us on the matters we are concerned about,” Lafreeda reports. “We all have the best intentions for the restaurants and the brand. Sometimes they win, sometimes we win, but I always feel we have a voice, we have been heard and it’s been fair.”
Until the current leadership took over, Lafreeda would have said a few years ago that corporate leaders had more power than the company’s franchisees. “This regime is, ‘Let’s work together and do what’s best for the brand,’” she says. “Everybody may not agree with us, but we are going to hear you and find the best solutions. I have a very large stake in the brand from a franchise perspective, so it’s important that I feel my franchisor hears my thoughts, concerns and needs. Sometimes as franchisees we have to push back on things, but I feel there is a fair and open forum to do so. We all work together for the good of the brand.”
Lafreeda serves as DFA treasurer. “The DFA office helps us manage everything from our materials and our meetings to our annual convention,” she says. “We all work independently out of our own offices and meet quarterly for board meetings in addition to monthly conference calls.”
Each board member also sits on one of Denny’s Brand Advisory Councils – development, marketing and operations. Non-board members such as Denny’s corporate employees and select franchisees are invited to participate in these committee meetings.
“It is a very good process to vet, test and make the best decisions for the brand,” says Lafreeda, who also sits on the development committee. The committees consider issues such as proposed marketing promotions, store remodeling features and operational execution testing.
Everybody Eats at Denny’s
Denny’s corporate has many statistics on the demographics of its typical customers. “I believe everybody has been a Denny’s customer at one time or another, whether looking for a place to eat in the middle of the night or looking for a great breakfast,” Lafreeda says. “We have something for everybody. No matter who you are, come as you are. There is always something exciting and delicious to eat off the full menu and a wide variety of tasty selections to choose from off our 2–4–6–8 Value Menu.
“If you are budget-conscious, Denny’s has something to delight and please everyone anytime of the day or night, 24/7, 365 days a year.”
Lafreeda relies on the Denny’s name to bring in customers. “We have a very strong brand awareness,” she maintains. “If you ask, 95 percent of the people will say they know the Denny’s brand and 95 percent of the population has tried Denny’s. We do a large portion of our business on breakfast; however, we are experiencing great success in the dinner segment with our new Heritage Scheme remodeling efforts. It is a warm, inviting environment, and guests are telling us they want to come see us for dinner, too. We do the bulk of our business from Friday to Sunday. We have families that want to dine out together, and that’s typically the weekend times.”
Denny’s requires its franchisees to remodel their locations every seven years. “I have one a month to remodel for the next three years,” Lafreeda calculates. “With 75 restaurants and seven years, I have 10 to 11 restaurants to remodel annually on average. It is hard to remodel that many stores a year, but it is almost always worth it.
“I try to close on Sunday at 3 p.m. and reopen by Thursday at 6 p.m., but it depends on if you run into any issues,” she concedes. “Typically, it takes five days, but I’ve also had them go two weeks. When you remodel your restaurants regularly, your closure time is minimal.”
The remodeling elements include new carpet and flooring, tile, tables and chairs, wainscoat, ceiling tile, lighting and a new picture/mural package, along with fresh paint and some additional elements franchisees have the option to choose. “We schedule the year and plan it out accordingly based on weather conditions etc.,” Lafreeda says. “We typically use contractors who are experienced in remodeling Denny’s and know what they’re doing. They get in and out and get the job done. I go with the vendors who fabricate the booths and make the equipment offsite and ship it to the restaurant ready to install.”
Lafreeda celebrated her 30th year in business last year and attributes the company’s success and longevity to several factors. “I’ve been hands-on the whole time,” she says. “We’ve always saved for a rainy day and there will always be a rainy day. I have a dedicated team that’s been with me for a very long time. They’re seasoned, they know restaurants and they know Denny’s. I could not do it without them and their passion.
“I surround myself with a lot of great people,” she continues. “Sitting on the DFA board is an honor. I get to share ideas and work with some very smart people. I also get to learn and collaborate with the board of Denny’s Corp. It’s a wonderful partnership, and all of it plays to our success. I’m very grateful for the opportunities and successes I have had with Denny’s.”
The meaning of language is often determined by context, and in a Denny’s restaurant, a Grand Slam has a distinctly different meaning than in a ballpark. “Our most famous meal is the Grand Slam,” Senior Vice President of Global Development Steve Dunn declares. “That’s our strongest, most well-known menu item. The Grand Slam is trademarked, and the Grand Slam product lines are our most popular.”
Originally two each of eggs, bacon, sausage and pancakes, the Grand Slam line now includes the Fit Slam, the Lumberjack Slam, the French Toast Slam, the Belgian Waffle Slam and the Build Your Own Slam. “At Denny’s, we have a little bit of everything,” Dunn emphasizes. “So you can go to a Denny’s in Hawaii and get Portuguese sausage and rice, and in Texas get huevos rancheros or churrasco steak in Miami. We have such a broad menu that we have the ability to go and treat local favorites.”
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Denny’s restaurants are known for their consistency and availability. “We serve breakfast 24/7,” Dunn points out. “A significant portion of what we sell are breakfast items. That’s what Denny’s is famous for. Everything on our menu is served 24 hours. So that’s one of the competitive strengths that we believe we have. No matter what you want day or night, you go into a Denny’s and you can get it.”
Denny’s understands who its customers are. “It’s really simple for us because we’re so large,” Dunn says. “We are the nation’s largest family dining chain. We cater to a pretty broad crowd. There are a few specific targets we go after – families with kids, millennials and boomers – but we get a little bit of everybody.
“We’re kind of the melting pot of the United States from a demographic standpoint. We’re open to all demographics, but working-class, blue-collar is definitely our sweet spot.”
Menu Choices
Although Denny’s is known for breakfast items, they are not always consumed at breakfast. “Because we’re always open, we have four distinct periods – breakfast, lunch, dinner and late-night. They’re about equally split, so there’s no one heavy predominance. Breakfast is the most popular menu item, whether it’s eaten at breakfast, lunch, dinner or late-night.”
Some Denny’s restaurants choose regional favorites for their menus, but others stick to the varieties of cuisine already offered on Denny’s regular menu. What criteria does Denny’s use to choose its menu items?
“You’ve got to be on top of the customer’s wants and needs,” Dunn points out. “At any given time, our menu pipeline consists of close to 50-plus items. We have a very robust product development team that goes through a very thorough, creative vetting process and consumer testing before anything ever gets launched at Denny’s.
“We took some chances years ago on a bacon shake and a bacon sundae,” Dunn recalls. “We were out in front of everybody with bacon. We found new ways to serve bacon. We had a fried cheese sandwich. We’ll be a trend-buster.” Despite these excursions into extravagance, Denny’s has healthy “Fit Fare” on its menu and is known for hearty meals at a good value rather than indulgent fare.
Franchisee Search
Denny’s relies heavily on its franchisees – only 10 percent of its 1,700 locations are company-owned. Dunn does not generalize about what Denny’s seeks in its franchisees, some of which are international.
“There’s just no perfect profile of a franchisee,” Dunn says. “There’s a number of different characteristics we look for at Denny’s for our brand. One of the most pressing things is, what has been somebody’s past track record in restaurants, retail or something consumer-facing? The restaurant business is so consumer-focused, we want people who know how to deal with the customer to be successful in that arena.”
Experience building, managing and leading successful teams is a prerequisite. “Frankly at Denny’s, people who come here to franchise already are very successful,” Dunn notes. “The minimum net worth requirement is $1 million to invest. We’re talking to people who are very successful in all aspects of business already. We don’t like passive management, somebody who comes in as a pure investor. We want active management.”
Denny’s largest franchisee has more than 80 restaurants, and many have more than 50. Despite this size, franchisees must be able to supervise their locations effectively. “They must be involved in the day-to-day business,” Dunn says. “That doesn’t mean you’re out on the front line cooking pancakes, but it means your leadership and ability to have your presence felt is important.”
For the future, Dunn anticipates greater growth in Denny’s franchised locations. His argument to those considering a Denny’s franchise is longevity. “We’ve been around for more than 60 years,” he points out. “Denny’s was there yesterday and will be there tomorrow. That gives people comfort when they make a decision to invest their money with a brand that is continuing to grow.”