Popular diner chain sold off as restaurants face financial crisis
In this DML Report…
Denny's, the 72-year-old restaurant chain with 1,300 locations, has agreed to a $322 million deal to go private, with control passing to private equity firm TriArtisan Capital Advisors and major franchisee Yadav Enterprises. This follows the closure of 180 restaurants this year and a nearly 3 percent drop in U.S. sales, as announced by the company. Similarly, Yum Brands is seeking to sell Pizza Hut's 6,700 pizzerias after a 6 percent decline in sales, amid competition from Domino's and Papa John's. Yum's other brands, including Taco Bell, KFC, and Habit Burger Grill, achieved a record $1.9 billion in revenue, with Taco Bell seeing a 7 percent sales increase. Yum CEO Chris Turner stated that Pizza Hut retains strong consumer loyalty but may achieve its full value under different ownership.
Sit-down restaurant chains are facing widespread challenges from rising food costs, reduced spending by middle-income consumers, and shifts in preferences among younger diners toward healthier options like grain bowls over pizzas and fried foods. This has led to slower traffic and financial strain across the industry. Over the past year and a half, several chains have filed for bankruptcy, including TGI Fridays, which closed 130 locations, as well as Red Lobster, Hooters, Bertucci's, and On The Border. Other brands like Sweetgreen have closed stores after growth slowed, Red Robin is rapidly shutting down locations, and Chipotle has experienced fluctuating sales.
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Some chains have countered the downturn by emphasizing value and menu improvements. McDonald's reversed its sales slump through lower-cost offerings, while Chili's has sustained momentum with deals such as a $14.39 burger and fries meal that competes with fast-food rivals like Burger King. Retail analyst Neil Saunders noted Chili's success stems from enhanced product quality, effective social media engagement, and attracting younger customers, resulting in increased restaurant traffic.