Restaurant Chains, Buying Growth Works

 

When a restaurant chain had been in a specific sector as a leader for 50+ years you understand the sector, the competition, the customer, and compliancy. The consumer is dynamic and chain restaurants need to be as dynamic as consumers according to Steven Johnson, Grocerant Guru® at Tacoma, WA based Foodservice Solutions®.

There can be no doubt that Denny’s recent acquisition of a complementary daypart restaurant concept is a great move, and will provide incremental top line growth and bottom-line profits, while edifying Denny’s knowledge of the daypart insights even more according to Johnson.

Denny’s CEO Kelli Valade, stated, “The A.M. Eatery segment is fast-growing and Keke’s is a brand with attractive unit economics and strong potential,” In short it is a platform for growth!

So, average unit volumes at Keke’s 44 franchised and eight company-owned restaurants are about $1.9 million, and the chain’s price points are about 20% higher than Denny’s. The company appeals to high-income Gen Z and millennial consumers and families with kids.  Enough said!

In case you did not know, Keke’s recorded same-store sales increases of 18% during 2021 versus 2019, Denny’s executives said during a May earnings call. As of May, same-store sales were up 12% year-to-date versus 2021. Adjusted EBITDA contribution is expected to be between $6.5 million and $7 million, executives said. 

The breakfast concepts have done well in recent quarters. First Watch, for example, posted similarly robust same-store sales growth during Q1 2022, with same-restaurant sales increasing 27.2% and same-restaurant traffic increasing 21.9%, according to an earnings release. First Watch, which went public last year, aims to grow from over 420 units to 2,200.

 

1. Denny’s completed its $82.5 million acquisition of Keke’s Breakfast Cafe, which has 52 units across Florida, the company announced Wednesday. 

2. Denny’s used cash on hand as well as funds from a revolving credit facility to purchase the chain. 

3. Keke’s will operate independently from Denny’s and maintain its own leadership, strategies, products, marketing, operations and development initiatives.

Success does leave clues. One clue that time and time again continues to resurface is “the consumer is dynamic not static”.  Regular readers of this blog know that is the common refrain of Steven Johnson, Grocerant Guru® at Tacoma, WA based Foodservice Solutions®.  Our Grocerant Guru® can help your company edify your brand with relevance.  Call 253-759-7869 for more information. 

Building a Larger Share of Stomach