Denny's and Amazon Restaurants Join Forces on Delivery
Denny’s off-premises growth has contributed significantly to its progress in recent quarters. This past period, which marked the start to fiscal 2018 for the 1,700-unit chain, off-premises sales represented 9.8 percent of total sales, an increase of 110 basis points from 8.7 percent in December. Since launching Denny’s on Demand in June 2017, off-premises sales have lifted about 300 basis points as a percentage of total sales. More than 3 million orders have comes through Denny’s On Demand channels so far.
And in many ways, this growth is really still in its infancy. Broken down, about 52 percent of Denny’s 182 company-run units and only 22 percent of franchised stores are actively engaged with multiple delivery options.
This is all about to ramp up.
Denny’s announced Thursday (June 28) that it’s now offering delivery through Amazon restaurants. Denny’s already offers digital ordering across its app, website, Amazon Alexa, and with other third-party providers. “Our Denny’s On Demand platform continues to grow, both in use by our guests and in the ways that it is delivering convenience across the country,” said John Dillon, chief marketing officer for Denny’s, in a statement. “As our guests continue to seek convenient ways to enjoy their Denny’s favorites, delivery has become increasingly important and the addition of Amazon Restaurants brings another delivery option to our platform. We look forward to growing our delivery network with Amazon Restaurants as they continue to expand their reach.”
Denny’s links to Amazon Restaurants via Olo Rails, which allows Prime members to locate their nearest Denny’s and have the order sent directly to the restaurant, where it is prepared, picked up by Amazon Flex delivery partners, and then brought to the customer’s door.
“We’re pleased to be able to offer Prime members more great options when it comes to Amazon Restaurants,” added Gus Lopez, general manager of Amazon Restaurants at Amazon. “We are continually seeking out ways to add convenience and value to our members’ lives, and we believe adding Denny’s to our service does exactly that.”
This side of the business intrigues Denny’s since it meshes with what’s been a revitalized movement in the past couple of years. From an off-beat social media personality (check the Tumblr account) to an ad campaign for Dulche de Leche Craft pancakes that asks, “You mean, Denny’s, Denny’s?” to a Star Wars fueled campaign, the chain has done its best to shed any sterile image it might have had in an effort to court lapsed and new guests, especially younger diners. Not to mention a menu overhaul that has quietly flipped or improved some 70 percent of items in the past five years. This includes 50 percent fluffier pancakes, which hit the market in the summer of 2016.
To date, 36 percent of Denny’s off-premises business is being driven by 25–34-year-old guests; 28 percent are 18–24. In May, Denny’s introduced a new ordering platform that enables guests to place a mobile or online order for take or delivery (where available). And even, in select markets, this delivery service is live 24/7.
One example of its effectiveness: On Christmas Day, a company-record 12.8 percent of total sales came via off-premises.
CEO John Miller said the to-go transactions have been highly incremental and over-indexed to the late-night dinner daypart. There is a cost involved, however. Company restaurant operating margin was $14.3 million, or 14.2 percent of company restaurant sales in Q1, compared to $15.9 million, or 17 percent, in the prior-year quarter. This was primarily due to an increase in third-party delivery costs, a prior year benefit in general liability expense, and an expected rise in product costs and minimum wages, partially offset by higher sales, Denny's said.
Denny’s is also in the thick of a Heritage remodel program executives say is generating a mid-single-digital range sales lift. In Q1, franchisees completed 52 remodels and Denny’s finished one company store. About 71 percent of the system was updated at that point, with about 80 percent expected to be completed by the end of 2018.