Denny’s Franchise in 2024: Costs, Fee & FDD
Thinking of investing in a Denny’s franchise? Discover key insights about the costs, profitability, and franchise system of this iconic 24/7 diner. Learn what makes it a solid option for potential franchisees. Read more here!
Table of Contents:
Denny’s is a classic American diner that has earned a place in the hearts (and stomachs) of people across the globe. Founded in 1953 by Harold Butler and Richard Jezak in Lakewood, California, Denny’s started as a small donut stand called “Danny’s Donuts.” The founders aimed to serve up affordable, delicious meals in a family-friendly environment. Over the years, it evolved into the 24/7 diner we know today, becoming an iconic name in the full-service restaurant industry. Known for its around-the-clock service, Denny’s has become a go-to destination for breakfast lovers, night owls, and road trippers alike.
At its core, Denny’s is famous for serving hearty breakfast items like pancakes, eggs, and bacon all day long. But its menu extends far beyond breakfast, offering everything from burgers and sandwiches to steaks and salads. Popular dishes include their Grand Slam Breakfast, which customers can customize, and the Moons Over My Hammy sandwich. Denny’s caters to families, couples, solo diners, and late-night crowds, appealing to a wide range of customers looking for comfort food at any hour.
As of today, Denny’s operates over 1,700 locations worldwide, including spots in countries like Canada, Mexico, and even the Philippines. This global reach speaks to the brand’s popularity and ability to connect with people across cultures. In the U.S. alone, millions of customers visit Denny’s daily, keeping the restaurant chain bustling 24/7. Its presence on highways, in cities, and suburban areas ensures Denny’s is accessible to a broad customer base.
Denny’s franchisees benefit from a comprehensive support system. The company offers extensive training programs to ensure franchisees are well-equipped to run their locations. New owners go through hands-on management training, and there’s continuous support in areas like marketing, operations, and supply chain management. This makes it easier for franchisees to navigate the challenges of running a restaurant, while also tapping into Denny’s extensive brand recognition and loyal customer following.
Denny’s Franchise Insights
- Denny’s total investment range to open a location is between $1.62 million and $3.06 million.
- The brand’s 24/7 operational model means franchisees can capture business at all hours, with late-night sales making up nearly 20% of overall revenue.
- As of the most recent data, Denny’s has 1,407 U.S. locations, with 1,342 being franchised and 65 corporate-owned.
- Denny’s serves over 27 million Grand Slam Breakfasts each year, making it one of the most iconic dishes in American dining.
Denny’s Franchise Key indicators
Growth YOY (%)
-2%
vs industry 0%
Total U.S. Franchised Units
1,342
3-Year Failure Rate
11%
vs industry 10%
Sales-to-Investment ratio
1.1:1
How much does it cost to open a Denny’s franchise?
Understanding the potential investment size and capital requirements is crucial when considering opening a Denny’s franchise. These financial commitments, including initial franchise fees, equipment costs, and ongoing operational expenses, impact the feasibility and profitability of the venture. Thoroughly evaluating these factors ensures that potential franchisees are prepared for the financial responsibilities and can make informed decisions about their ability to sustain and grow the business, ultimately contributing to long-term success.
Min & Max Investment
Opening a Denny’s franchise involves several key costs, which are outlined in Item 7 of the Franchise Disclosure Document (FDD). You can see a breakdown of the costs to open a Denny’s below from the most recent Item 7 below:
| Type of Expenditure | Minimum Investment | Maximum Investment |
|---|---|---|
| Initial Franchise Fee | $30,000 | $30,000 |
| Site Improvements | $50,000 | $500,000 |
| Building and Improvements | $950,000 | $1,500,000 |
| Architectural Design and Engineering | $30,000 | $60,000 |
| Equipment, Fixtures, and Furnishings | $350,000 | $450,000 |
| Signs | $80,000 | $120,000 |
| Standard Enterprise Technology Platform | $25,000 | $40,000 |
| Opening Inventory and Supplies | $20,000 | $30,000 |
| Opening Advertising | $3,000 | $5,000 |
| Opening Menus | $300 | $800 |
| Opening Gift Cards | $74.75 | $74.75 |
| New Restaurant Opening Training | $0 | $36,000 |
| Security Deposits | $10,000 | $15,000 |
| Insurance | $15,000 | $20,000 |
| Soft Costs (Permits, Survey, Inspections) | $5,000 | $100,000 |
| Additional Funds (3 months) | $50,000 | $150,000 |
| Total Estimated Initial Investment | $1,618,375 | $3,056,875 |
Item 7 in the Franchise Disclosure Document (FDD) is the “Estimated Initial Investment” section. It outlines the total costs a franchisee can expect to incur when starting a franchise, including the initial franchise fee, equipment, inventory, real estate, and other startup expenses. This section is crucial because it provides potential franchisees with a detailed understanding of the financial commitment required, helping them assess affordability and plan their investment strategy effectively.
Required Capital
To open a Denny’s franchise, the required capital involves both the initial investment costs and a net worth requirement set by Denny’s. Let’s take a closer look below:
- Initial Investment As shown above, the total estimated initial investment ranges from $1.62 million and $3.06 million. This includes all the startup costs such as the franchise fee, real estate, construction, equipment, initial inventory, and additional funds for initial operating expenses. Assuming that you will finance your franchise investment, you should plan to have 20% of the total investment amount in the form of equity (cash) for the investment.
- Required liquid assets Generally, for a franchise with this level of investment, you’d be expected to have at least $500,000 to $750,000 in liquid capital. This is a rough estimate based on other similar full-service franchises.
- Net worth You’d typically need a net worth of around $1.5 million to $2 million or higher. This ensures the franchisee has the financial stability to handle both the initial investment and any operational costs during the ramp-up period.
How much does a Denny’s franchise owner make?
Calculating the salary of a Denny’s franchise owner involves analyzing gross sales to determine total revenue, assessing operational efficiency to understand profit margins, and accounting for franchisor fees and additional expenses such as rent, utilities, and payroll. Effective management of these factors can significantly impact the profitability and financial success of a Denny’s franchise owner. This comprehensive financial analysis helps estimate net profits, from which the owner’s salary can be derived. A clear understanding of these factors ensures accurate salary projections and financial planning for sustainable business operations.
Denny’s Revenue & Gross Sales
Based on most recent analysis, Denny’s franchises have a median gross sales of $1,766,751. This strong financial performance underscores the brand’s robust consumer demand and potential for significant revenue generation.
Which key factors impact the average revenue performance of Denny’s franchisees?
The performance of U.S. franchisee median gross sales for Denny’s in recent years likely reflects a combination of factors. One key driver could be the rebound in dine-in traffic following the easing of pandemic-related restrictions, which saw customers return to full-service dining experiences. Additionally, Denny’s strong brand recognition and its 24/7 service model likely helped maintain customer loyalty. Menu innovations, promotional strategies, and partnerships with third-party delivery platforms could have also contributed to increased sales. However, inflationary pressures and rising food and labor costs may have tempered profitability, even as sales volume improved year over year.
Denny’s Franchise Operational Costs
When opening a Denny’s franchise, several key ongoing operational costs will play a significant role in your financial planning:
- Staffing and labor costs As a full-service restaurant, wages for kitchen staff, servers, and managers are one of the largest ongoing expenses. Additionally, you may need to factor in healthcare and benefits depending on the size of your staff.
- Food and beverage costs Since Denny’s offers a broad menu, keeping inventory stocked with fresh ingredients while managing food waste will be crucial to controlling costs.
- Utilities and maintenance Operating a 24/7 diner means higher utility costs, including electricity, gas, and water. Regular maintenance of kitchen equipment, HVAC systems, and the restaurant interior is also essential.
- Rent or mortgage Whether leasing or owning the property, rent or property payments for your restaurant location will be a significant, ongoing cost.
- Technology and POS systems Keeping your point-of-sale systems, kitchen technology, and delivery app integrations updated requires consistent investment.
Careful planning and budgeting for these operational costs are crucial for the financial health and success of your Denny’s franchise.
Denny’s Franchise Fees
When considering opening a Denny’s franchise, it’s important to be aware of the ongoing fees that you will need to budget for as part of your operational expenses. These fees help support brand development, marketing, and other business functions crucial to maintaining the success of your franchise.
Here are some key ongoing fees:
- Royalty Fee 4.5% to 7% of your gross sales, payable weekly. This fee contributes to the overall management and support from the franchise.
- Brand Building Fund 3% to 3.25% of your gross sales, payable weekly. This fund is dedicated to marketing and promoting the Denny’s brand to ensure customer engagement.
- Local Advertising Coop Fee As determined by the local advertising cooperative, payable weekly. This ensures your local market benefits from regionally targeted promotions.
There may also be additional fees not listed here, which could vary based on location or specific franchise agreements. These fees should be factored into your overall cost analysis as you prepare to open a Denny’s franchise.
Denny’s Franchise Earnings
Based on the most recent data, Denny’s franchisee median gross sales were approximately $1,766,751 for a single location. For an owner-operator, the estimated operating profit earnings from this gross sales figure were around $176,675 based on industry margins. These earnings reflect the profit after accounting for typical operational costs but do not include any additional factors like debt servicing or one-time costs such as equipment replacements.
These numbers provide a solid baseline for potential earnings, giving franchisees a clear view of potential profitability. Of course, actual earnings may vary based on location, market conditions, and how efficiently the franchise is managed.
How to Open a Denny’s Franchise
To become a Denny’s franchisee, you’ll need to follow a series of steps, starting with your initial inquiry and ending with the opening of your restaurant. Here’s an overview of the process:
- Initial Inquiry You or your franchise specialist submits an initial inquiry basic information about your interest and background. You should also conduct thorough research on the franchise, including seeing all of the information available on the Vetted Biz franchise intelligence platform, including access to the most recent Franchise Disclosure Document (FDD).
- Preliminary Approval After submitting your inquiry, Denny’s will review your financial qualifications (net worth, liquid capital) and business background. If you meet their criteria, you’ll receive an invitation to proceed.
- Franchise Disclosure Document (FDD) Denny’s will provide you with the FDD, which outlines the financials, operational requirements, and expectations for franchisees. You’ll have time to review this document thoroughly.
- Discovery Day You may be invited to attend a Discovery Day, where you can visit the Denny’s headquarters, meet corporate leadership, and gain more insights into running a franchise.
- Franchise Agreement and Financing After your due diligence, you’ll sign the franchise agreement and arrange financing for the investment, either through personal funds or loans.
- Training Before opening, you’ll attend a comprehensive training program covering restaurant operations, customer service, staff management, and more.
- Site Selection and Build-Out Denny’s will assist in finding a suitable location and help oversee the build-out of your restaurant, including design and equipment installation.
- Grand Opening Once construction and staff hiring are complete, you’ll work with Denny’s marketing team to plan a grand opening. Afterward, your restaurant will be fully operational, with ongoing support from the corporate team.
Pros & Cons
Pros
Strong Brand Recognition: Denny’s is a well-known brand with a loyal customer base, which can help attract traffic to your location from day one.
24/7 Operating Model: The round-the-clock service offers multiple revenue opportunities, particularly during late-night hours, increasing overall sales potential.
Proven Business Model: With decades of success, the Denny’s franchise system has demonstrated consistent profitability for its franchisees across multiple markets.
Cons
High Initial Investment: The cost to open a Denny’s franchise can be high, with investments ranging from $1.6 million to $3 million, which may require substantial upfront capital or financing.
Labor-Intensive Operations: Operating a 24/7 restaurant requires managing large teams, leading to higher labor costs and more demanding operations.
Competitive Market: Full-service dining faces tough competition from other restaurants and fast-casual options, meaning you’ll need a strong strategy to stand out.
