Denny's - The Rise and Fall...And Rise Again

[Music] denny's is your classic diner that almost never closes dennis it's always open aside from being open all the time they're known for their low prices and signature breakfast items specifically the grand slam as eggs pancakes sausage and bacon and not the healthiest meal i should warn you but it's become an american classic it was first served in 1977 at a denny's in atlanta inspired by the recent retirement of hank aaron from major league baseball he had set the career home runs record a few years earlier as a member of the atlanta braves and amazingly all of these years later denny's remains one of the largest restaurant chains in the united states they are actually known as america's diner everybody likes denny's it's an american institution there are currently 1 650 of them operating on this planet and over 90 percent of them are in the us they're in every state except delaware the reason i say that it's amazing that they're still so common is because they have had some major troubles over the years some issues in the early 1970s but the more significant ones happened all throughout the 1990s and even well into the 2000s i'm going to get more into it but for now just look at this graph over the 17 year span 17 years they lost money every year with the only exception being that tiny profit that they made in 2002 i even actually had to exclude 1993 from this graph because the 1.6 billion dollar loss they reported that year was throwing everything off plus that number is a bit misleading because it's mostly due to impairments of goodwill and other intangible assets but it's still bad because it reflects the fact that the company had lost a lot of its value i'm going to talk about what was happening with all of this as i highlight the various rises and falls of america's diner denny's you know denny's has to be the most uninspired name in 1953 harold butler moved across the country from buffalo new york to los angeles california with the intention of starting his own business once he was there he teamed up with a partner named richard jezek to open a small 900 square foot donut shop called danny's donuts to me anyway it's strange that two guys named harold and richard would name their business danny's donuts it's not even confirmed to be named after anybody in particular it's believed that they chose it because it was a friendly sounding familiar name that sounded good with the word donuts i'll admit it has more of a ring to it than harold's donuts but i feel like there should still be a danny in the story somewhere anyway that original donut shop was successful right from the beginning generating 120 000 in profits in its first year which i'll point out is technically more money than they made all through the 1990s given that it was so popular they opened a second location about 20 miles away from the original the first one was in lakewood and the new one was in garden grove that one didn't do as well at first so the response was to expand their menu they installed a grill and started selling hamburgers which improved things and motivated them to add more menu items as they continued opening more locations by 1956 there were up to six of them when richard left the business while harold remained to continue opening new ones faster than ever to reflect that expanded menu they changed the name from danny's donuts to danny's coffee shop which proved to be confusingly similar to a different local restaurant called coffee dans so to separate themselves they again changed the name to denny's coffee shops i mean danny didn't exist anyway so why not just change it to denny which was then changed a final time a couple years later when they dropped the coffee shop label and simply went by denny's so three name changes in the first decade but not any since then their early success came from a low-cost high-volume model much like today they offered a limited selection of standardized foods so the simplicity and the high amounts of it allowed them to sell it at a low cost plus the denny's restaurants were strategically located in 1956 president eisenhower signed off on the funding to build the u.s interstate highway system meaning new roads were being built all over the country people were traveling in their cars like never before and harold butler was taking advantage of that by placing new denny's locations all around these new highway exits there were high traffic areas and the drivers would conveniently stop at denny's to eat throughout the 1960s harold continued with the same strategies in 1963 they started franchising locations and five years later they raised a bunch of money by becoming a public company all things that allowed them to grow to hundreds of locations by the end of that decade and that is where things went bad in 1969 i get the sense that harold butler was getting a little too obsessed with expanding the business they had bought this chain of donut shops called winchell's which seemed to make enough sense but then the following year they tried to buy the popular las vegas hotel and casino caesar's palace now the details of what happened here are a little unclear but harold butler went about doing this in a very shady way which proved to be a huge mistake the sec accused him of somehow trying to make a deal that wasn't transparent to all of the shareholders some of them would be benefiting more than others but the ones that weren't benefiting wouldn't be aware of it if that makes any sense i know it's weird but the public did not react well to this they perceived it as a big scandal everyone started selling their stock and that caused the share price to plummet the public did not want harold butler associated with the company any longer either so soon after he stepped down and sold all of his stock at a recently reduced 3 million dollars after he left denny's he stayed in the industry establishing different restaurant chains obviously none of them were nearly as successful before ultimately dying of a heart attack in 1998 back to denny's with harold gone they regained the public's trust and things started to recover they opened an additional 200 locations throughout the 1970s and as i said that's when they started serving the grand slam but in 1985 everything started changing i promise there was a lot happening in this short period of time that year they were taken off the stock market when they were bought by a group of investors in an 800 million dollar leveraged buyouts i know everyone hates to hear that term on this channel because it adds a ton of debt to the acquired company and usually doesn't end very well i will get to that but two years later they sold denny's for a little more than they bought it for the buyer here was tw services who can really sidetrack this video to keep it simple i'll just say that a few years before this they were focused on housing and hospitality they owned a major airline hotel chain and real estate company but were now transitioning into the restaurant industry they had already owned a bunch of hardy's franchises and were looking to add to that when they bought the chains el poyo loco and denny's it's not over yet the following year the majority of tw services was acquired for an overvalued 1.7 billion dollars in this crazy hostile takeover given that series of events i don't think you'll be surprised to learn that this company was hovering around two billion dollars in debt without any practical way to bring that down it's way oversimplifying it of course but a grand slam cost 1.99 at that time so they would have to sell over a billion of those to equal that amount of money i already showed you that they weren't reporting any profits and a big reason behind that was their interest expense paying over 200 million dollars every year in interest made it next to impossible to have any money left over in fact if you were to take that part of it out of the equation they would have been in the positive but still their sales were struggling partially because of more competition from emerging chains in the industry but i'd say their bigger concern at the time was their reputation in the 1990s i hate to say it but denny's was generally considered to be racist against black people i'm honestly surprised that they weren't doing even worse given all the claims against them it's a long list of accusations refusing service to black people requiring them to pay before eating sometimes charging them more altogether unfairly ejecting them from the restaurant segregating the customers just about any claim that you can imagine possibly the highest profile one of these came from six black secret service agents it happened in annapolis maryland president clinton was there to make an appearance at the naval academy and while they were there the agents assigned to protect him went out to eat at the local denny's in their group the 15 of them that were either white or hispanic were served their food while the six black agents weren't served they waited there for an hour the food never came so they left and filed a lawsuit in 1995 denny's paid around 50 million dollars to settle three separate class action lawsuits involving racism which was the largest amount ever for a case involving the civil rights act of 1964 so to summarize here denny's had over 2 billion dollars in debt was paying over 200 million dollars in interest each year in addition to this 50 million dollar settlement that was a result of numerous claims of racism that were rightfully damaging their reputation i mean how do you recover from that and the answer is that it did take quite a bit first off they did take a lot of measures to try to eliminate the racism anything you can think of really diversity training programs new hiring practices they issued apologies obviously they fired the troublesome employees from what i can tell they did seem to be effective the incidents were happening less often and as the ones from the past became more distant i suppose people started to forgive and forget so their reputation slowly started to recover morally that's the worst part of it obviously but financially the worst part of it was the debts to address that there really weren't many options so they were forced to file for bankruptcy it happened in 1997 and the result of it was having their debt more than cut in half but even at that level it was still too much so to further address it they refocused the company remember throughout all of this time they owned el pollo loco and those hardy's franchises and all these other restaurant chains that were splitting their focus so their new plan made a lot of sense it was to sell everything that wasn't denny's so they can better concentrate on it and use the money from those sales to pay off their debts and they did continue lowering it as time went on so in the following years as their interest became more manageable and their reputation started improving denny's was finally reporting profits starting in 2006 and continuing on from there 2020 was a small loss but you know that's expected another thing that might have been big for them was believe it or not the recession when it's bad times economically like in 2008 or 2009 that could be good times for a restaurant known for their low prices they took advantage of it too in early 2009 just months after the big stock market crash denny spent an estimated three million dollars to air their first ever super bowl commercial they advertised a promotion where they were giving away free grand slams as many as 2 million people showed up to that and i'm guessing many of them were having tough times and very much appreciated it the whole thing was a smart way to bring people in to denny's and potentially flip the public's perception of them so that was pretty eventful right a lot of it negative there was an illegal transaction a takeover a buyout multiple racism lawsuits crippling debt a bankruptcy and i can't get over this one quite possibly the most uninspired naming choice that i've ever heard let me know in the comments has any of this changed your perception of denny's what i mean is there is a lot going on behind the scenes here probably not the kind of stuff that you would expect to see when talking about america's diner that we all associate with pancakes and syrup so does any of this make you moored or less likely to go there and finally what do you think of the food itself how does it compare to waffle house or ihop or any other diner what's your favorite food there and any other thoughts you have about denny's or anything else discussed in this video and there's a lot of it leave them in the comments i'd like to hear what you have to say thank you for watching [Music] you

Channel: Company Man

Views: 1,030,578

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Id: E-oclgZcg90

Length: 12min 0sec (720 seconds)

Published: Wed Jul 14 2021