UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 FORM 10-K

For the transition period from __________ to __________

 Commission file number 0-18051

 DENNY'SDENNY’S CORPORATION

(Exact name of registrant as specified in its charter)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,”  “accelerated filer,” “smaller reporting company” and "emerging“emerging growth company"company” in Rule 12b-2 of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

As of February 21, 2018, 64,271,40522, 2024, 52,253,719 shares of the registrant’s common stock, $.01 par value per share, were outstanding.

TABLE OF CONTENTS

 

FORWARD-LOOKING STATEMENTS

 

The forward-looking statements included in the “Business,” “Risk Factors,” “Legal Proceedings,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and “Quantitative and Qualitative Disclosures About Market Risk” sections and elsewhere herein, which reflect our best judgment based on factors currently known, involve risks and uncertainties. Words such as “expect,” “anticipate,” “believe,” “intend,” “plan,” “hope,” and variations of such words and similar expressions are intended to identify such forward-looking statements. Such statements speak only as to the date thereof. Except as may be required by law, we expressly disclaim any obligation to update these forward-looking statements to reflect events or circumstances after the date of this Form 10-K or to reflect the occurrence of unanticipated events. Actual results could differ materially from those anticipated in these forward-looking statements as a result of a number of factors including, but not limited to, the factors discussed in such sections and, in particular, those set forth in the cautionary statements contained in “Risk Factors.” The forward-looking information we have provided in this Form 10-K pursuant to the safe harbor established under the Private Securities Litigation Reform Act of 1995 should be evaluated in the context of these factors. 

PART I

 

Description of Business

 

Denny’s is known as America's Diner,“America’s Diner”, or in the case of our international locations, “the local diner.” Open 24/7 in most locations, we provide our guests quality food that emphasizes everyday value and new and innovative products through our compelling limited time only offerings, delivered in a warm, friendly “come as you are” atmosphere. Denny'sDenny’s has been serving guests for nearly 6570 years and is best known for its all day breakfast fare, which is available around the clock.fare. The Build Your Own Grand Slam, one of our most popular menu items, traces its origin back to the Original Grand Slam which was first introduced in 1977. In addition to our breakfast-all-day items, Denny'sDenny’s offers a wide selection of lunch and dinner items including entrees, burgers, sandwiches salads and skillet entrées,salads, along with an assortment of beverages, appetizers and desserts.

References to “Denny's,” the “Company,” “we,” “us,” and “our” in this Form 10-K are references to Denny'sDenny’s Corporation and its subsidiaries. Reference to “Denny’s” or “Keke’s” are references to the specific brand. Financial information about our operations, including our revenues and net income for the fiscal years ended

Franchising and substantially all of our assets are located in the United States.

Franchising

 

Our criteria to become a Denny’s franchisee include minimum liquidity and net worth requirements and appropriate operational experience. We believe that Denny’s is an attractive financial proposition for current and potential franchisees and that our fee structure is competitive with other full-service brands. TraditionalOur current traditional twenty-year Denny’s franchise agreements have an initial fee of up to $40,000$30,000 and a royalty payment of up to 4.5%4.50% of gross sales. Additionally, our franchisees are required to contributecurrently contributing up to 3%3.25% of gross sales for marketing and may make additional advertising contributions as part of a local marketing co-operative. FranchiseApproximately 81% of our Denny’s franchised restaurants were operating under this traditional agreement as of December 27, 2023. License agreements for nontraditional locations, such as university campuses, may contain higher royalty and lower advertising contribution rates than the traditional franchise agreements. Our domestic contractual royalty rate averaged approximately 4.14%4.36% during 2017.2023.

We work closely with our franchisees to plan and execute many aspects of the business. The Denny'sDenny’s Franchisee Association (“DFA”) was created to promote communication among our franchisees and between the Company and our franchise community. DFAMembers of the DFA’s board members and Company management primarily work together through Brand Advisory Councils relating to Development, Marketing, Operations and Technology matters, as well as through a Supply Chain Oversight Committee for procurement and distribution matters.

Domestic Development

 

To accelerate the growth of the Denny’s brand in certainspecific under-penetrated markets, we offer certain incentive programs. These programs provide significant incentives for franchisees to develop locations in areas where Denny's does not have the topDenny’s has opportunities to grow market share. The benefits to franchisees can include reduced franchise fees, upfront cash payments, lower royalties and advertising contributions for a limited time period and credits towardstoward certain development services, such as training fees.

In recent years,addition to these incentive programs, we have opened restaurant locations within travel centers, primarily with Pilotincreased our domestic development commitments through our refranchising and Pilot Flying J Travel Centers. Additionally, we have opened nontraditional locations, which are primarily on university campuses. Asdevelopment strategy implemented during 2018 and 2019. These commitments were attached to the sale of 113 company restaurants during 2018 and 2019. At December 27, 2017, there were2023, we had approximately 155 travel center and nontraditional locations.78 domestic development commitments.

 

Through our variousIn addition to the development efforts,agreements signed for domestic restaurants, as of December 27, 2017,2023, we havehad potential to develop approximately 60 domestic128 international franchised Denny’s restaurants with our current development partners in our development pipeline.various locations including Canada, Central America, Indonesia, Mexico, the Middle East, the Philippines and the United Kingdom. The majority of these restaurants are expected to open over the next ten years. During 2023, we opened 11 international franchised locations, including five years. in the Philippines, four in Canada, one each in El Salvador and Puerto Rico.

Franchise Focused Business Model

Through our development and refranchising efforts we have achieved a restaurant portfolio mix of 90% franchised and 10% company operated. TheWe expect the majority of our future restaurant openings and growth of the Denny’s brand willto come primarily from the development of franchised restaurants. The following table summarizes the changes in the number of company restaurants and franchised and licensed restaurants during the past five years (excluding relocations):

The success of Franchise Operationsany restaurant is significantly influenced by its location. Our development teams work closely with franchisees and Franchise Business Coaches provide oversightreal estate brokers to identify sites that meet specific standards. Sites are evaluated based on a variety of our franchised restaurantsfactors, including but not limited to:

Product Development and Marketing

Menu Offerings

TheAs “America’s Diner,” Denny’s has created a menu offersfeaturing a large selection of high-quality, moderately priced products designed to appeal to all types of guests. We offer a wide variety of entrées for breakfast, lunch, dinner and late night dining, in addition to appetizers, desserts and beverages. Our Fit Fare® menu helps our guests identifycraveable items best suited to their dietary needs. Most Denny’s restaurants offer special items for children and seniors at reduced prices. Our “America’s Diner” brand positioning, which provides the promise of Everyday Value with craveable, indulgent products served in a friendly and welcoming atmosphere establishesfor all guests. We offer a variety of options for breakfast, lunch, dinner and late-night including classic entrees, salads, appetizers, desserts and beverages. Most Denny’s restaurants also offer kid’s menus and senior specials. Continuous product innovation is essential to meeting the framework forneeds of our primary marketing strategies. These strategies focus on optimizing our product offering to further align with consumer needs, which includes enhancingconsumers, including new offerings within our core “breakfast all day”breakfast platform, while providing everyday affordability, primarilyadding value across signature bundles, such as Super Slam, and delivering crave-worthy core menu and limited-time-only recipes. Our Denny’s menu can be conveniently enjoyed by guests either in our restaurants, via takeout, curb-side or delivery through our $2 $4 $6 $8 Value Menu®Denny’s on Demand platform and delivering compelling limited-time-only products.third-party delivery providers. 

Product Development

 

Denny’s, is a consumer-driven brand focusingfocused on craveable food and hospitality, provides a variety of menu choices for any time of day in a warm and the overall guest experience.comfortable atmosphere. Our Product Development team works closely with consumer insights obtained throughinnovates menu items that delight our guests. This team leverages insight from the most up-to-date trend data, primary and secondary qualitative and quantitative studies. Inputresearch, franchise expertise, vendor innovation and ideas from our franchisees, vendors and operators are also integrated into this process.operator experiences. These insights come together to form the strategic foundation for menu architecture, pricing, promotion and advertising.

Before introducing a new menu item can be brought to market, it iswe rigorously testedtest it against consumer expectations,expectations. We ensure that our culinary standards, of culinary discipline, food science and technology efficiencies, nutritional analysis, financial benefitfinancials and operational execution.execution all meet the business requirements. This testing process ensures that new menu items are not only appealing, competitive, profitable and marketable, but can be prepared and delivered with excellence in our restaurants.

We continually evolve our menu throughwith new additions, deletions orinnovations and improvements to meet the needs of a changingever-changing consumer and market place.needs.

Product Sources and Availability

 

Our Purchasing department administers programs for the procurement ofMost food products, paper and non-food products. Our franchisees also purchase foodpackaging supplies, and non-food products directly from our vendors under these programs.equipment used in all company and franchised restaurant operations are distributed to individual restaurants by third-party distribution companies. Our centralized purchasing program isprograms are designed to ensure uniform product quality as well as to minimize food, beverage and supply costs. The size of our brand providesbrands provide significant purchasing power, which often enables us to obtain products at favorable prices from nationally recognized suppliers.

While our Purchasing department negotiates contracts for nearly all products used in our restaurants,In the United States, the majority of suchDenny’s products are purchased and distributed through Meadowbrook Meat Company (“MBM”), a wholly owned subsidiary of McLane Company, Inc., under a long-term distribution contract. MBM distributes restaurantOutside the United States, we and our International Denny’s franchisees primarily use decentralized sourcing and distribution systems involving many different global, regional and local suppliers and distributors. Our international franchisees generally select and manage their own third-party suppliers and distributors, subject to our internal standards. All suppliers and distributors are expected to provide products and/or services that comply with all applicable laws, rules and supplies toregulations in the Denny’s system from approximately 200 vendors, representing approximately 90% ofstate and/or country in which they operate as well as comply with our restaurant product and supply purchases. internal standards.

We believe that satisfactory alternative sources of supplysupplies are generally available for all of the items regularly used by our restaurants. We have not experienced any material shortages of food, equipment, or other products which are necessary to our restaurant operations.

Marketing and Advertising

 

Our Marketing team employs integratedWe deploy national, local and co-operative marketing strategies to promote and advertising strategies that promote theamplify Denny’s brand. Brand and communications strategy, advertising, broadcast media, social media, digital media, menu management, product innovation and development, consumer insights, target segment marketing, public relations, field marketing and national/local promotions and partnerships all fall under the marketing umbrella.

Through our marketing team, Denny’s anticipates consumer and delivery options through Denny’s On Demand. Denny's deploysmarket trends and fully leverages consumer insights to determine strategies for brand communication and demand generation. We participate in comprehensive, integrated marketing strategies on aactivities, including print, broadcast, radio, digital and social advertising; multicultural marketing; public relations and brand reputation; customer relationship management; field marketing; and national level and through local co-operatives, targeting customers through network, cable and local television, radio, online, digital, social, outdoorpromotions.

We believe that the consistent and print media.reliable execution of basic restaurant operations in each of our restaurants, whether it is company or franchised, is critical to our success. We expect both our company and franchised restaurants to maintain the same high brand standards. Our standards are, and have been, critical to Denny’s success. They include best in class quality and preparation of food, meeting and exceeding our guests’ expectations for service, cleanliness and value and providing a friendly experience at each restaurant.

Brand Protection, Quality & Regulatory Compliance

Denny’s will only serveMaintaining brand standards is of the utmost importance for each of our brands. We pride ourselves in serving our guests food that is safe, wholesome and meets our quality standards. Our systems from “farm to fork,” are based on Hazard Analysis and Critical Control Points (“HACCP”), whereby we prevent, eliminate or reduce hazards to a safe level to protect the health of our employees and guests. principles. To ensure this basic expectation of our guests, Denny’s also has risk-basedwe have systems in place to validate onlythat require solely the use of approved vendors and distributors which can meet and follow our product specifications and food handling procedures. Vendors, distributors and restaurant employees follow regulatory requirements (federal, state and local), industry “best practices” and Denny’s Brand Standards.

Human capital management considerations are at the core of Our Guiding Principles, the drivers of which include leveraging our culture of belonging and Risk-based Preventive Controls for Human Food regulation (referredthe capability of our people to as the Preventive Controls for Human Food Regulation) is intended to ensure safe manufacturing/processing, packingfuel brand performance and holding of food products for human consumption in the United States. The regulation requires that certain activities must be completed by a “preventive controls qualified individual” who has “successfully completed training in the development and application of risk-based preventive controls”. Our Chief Food Safety Officer and Food Safety and Quality Assurance teams have been certified.

We offer comprehensive benefits that support our team members and their families’ overall well-being. We also contribute to programs that provide our team members with financial security, now and in the future. We offer a robust set of benefits and rewards that focus on recognition, career building, health and wellness, and other perks that are designed to make our employees’ experience productive and fun. We assess our culture and listen to our workforce through periodic employee engagement surveys. Numerous policy changes have been made or been influenced by the feedback we receive from our employees.

The mission of our Information Technology department is to align our technology strategy in support of our business strategies. We focus on leveraging technology to drive efficiencies, simplify and standardize operations, and streamline the guest experience. We also deliver solutions that support financial and regulatory issues or concerns. If operational brand standard expectationsneeds in addition to necessary business improvements. 

At the corporate level, we have a robust Enterprise Resource Planning (“ERP”) platform that supports finance, accounting, human resources and payroll functions. Our ERP is a cloud-based market solution, enabling us to take advantage of continual software improvements aligned with industry best practices. We also have and are not met, a remediation process is immediately initiated. continuing to develop systems that consolidate and report on data from our franchised and company restaurants, including transaction-level detail. These systems are collectively supported by an enterprise network that facilitates seamless connectivity for applications and data throughout our business infrastructure. 

Our Food Safety/HACCP program uses nationally recognized food safety training coursesinformation technology systems have been designed to protect against unauthorized access and American National Standards Institute accredited certification programs. 

We have augmented our technology infrastructure, primarily within digital and in-restaurant systems, to support the changing dynamics of operation. Our Food Safety/HACCP program has been recognized nationally by regulatory departments, the restaurantour industry and guest expectations. These enhancements were introduced through our peers. We continuously work toward improvingstandard change control mechanisms and followed prescribed standards for testing and introduction into our processesenvironment. There were no material changes introduced into the core of our technology operating systems, and procedures. We are advocatesall PCI—DSS compliance standards were followed.

In 2022, upon the acquisition of Keke’s, we integrated Keke’s systems and data into the enterprise systems currently employed. All Keke’s business leaders and employees outside the physical restaurant were provided with workstations that meet our existing standards for the advancement of food safetysecurity and performance. Work is underway with Keke’s leadership to prioritize additional technology investments within the industry’s organizations, such asrestaurants to support the National Councilneeds of Chain Restaurants (“NCCR”), NCCR Food Safety Task Force, the National Restaurant Association (“NRA”)brand, while also continuing the focus on security, scalability, and the NRA's Quality Assurance Executive Study Groups.standardization.

Seasonality

 

Restaurant sales are generally higher in the second and third calendar quarters (April through September) than in the firstfourth and fourthfirst calendar quarters (October through March). Additionally, severe weather, storms and similar conditions may impact sales volumes seasonally in some operating regions.

 

Trademarks and Service Marks

 

Through our wholly-owned subsidiaries, we have certain trademarks and service marks registered with the United States Patent and Trademark Office and in international jurisdictions, including, “Denny's®”but not limited to, “Denny’s®, “Grand Slam®”, “$2 $4 $6 $8 Value Menu®”  and “Fit Fare®“Keke’s Breakfast Cafe®.”.  We consider our trademarks and service marks important to the identification of our company and franchised restaurants and believe they are of material importance to the conduct of our business. In addition, we have registered various domain names on the internet that incorporate certain of our trademarks and service marks, andmarks. We believe these domain name registrations are an integral part of our identity. From time to time, we may resort to legal measures to defend and protect the use of our intellectual property. Generally, with appropriate renewal and use, the registration of our service marks and trademarks will continue indefinitely.

 

Competition

 

The restaurant industry is highly competitive. Restaurants compete on the basis of name recognition and advertising; the price, quality, variety and perceived value of their food offerings; the quality and speed of their guest service; the location and attractiveness of their facilities; and the convenience of to-go ordering and delivery options.

 

Denny’sOur direct competition in the full-service category includes a collection of national and regional chains, as well as thousands of independent operators. We also compete with quick service restaurants as they attempt to upgrade their menus with premium sandwiches, entrée salads, new breakfast offerings and extended hours.hours as well as grocery store chains as they enhance their ready-to-eat offerings to consumers.

 

We believe that Denny’s haswe have a number of competitive strengths, including strong brand recognition, well-located restaurants and market penetration. We benefit from economies of scale in a variety of areas, including advertising, purchasing and distribution. Additionally, we believe that Denny’s haswe have competitive strengths in the value, variety and quality of our food products, and in the quality and training of our employees. See “Risk Factors” for certain additional factors relating to our competition in the restaurant industry.

 

Economic, Market and Other Conditions

 

The restaurant industry is affected by many factors, including changes in national, regional and local economic conditions affecting consumer spending; the political environment (including acts of war and terrorism); changes in customer travel patterns including changes in the price of gasoline; changes in socio-demographic characteristics of areas where restaurants are located; changes in consumer tastes and preferences; food safety and health concerns; outbreaks of flu or other viruses (such as avian flu)COVID-19) or other diseases; increases in the number of restaurants; and unfavorable trends affecting restaurant operations,

such as rising wage rates, health care costs, utilitiesutility expenses and unfavorable weather. See “Risk Factors” for additional information.

 

Government Regulations

 

We and our franchisees are subject to local,federal, state, federallocal and international laws and regulations governing various aspects of the restaurant business, such as compliance with various minimum wage, overtime, health care, sanitation, food safety, citizenship, and fair labor standards.standards, as well as laws and regulations relating to safety, fire, zoning, building, consumer protection and taxation. We are subject to a variety of federal, state, and international laws governing franchise sales and the franchise relationship.relationship, as well as judicial and administrative interpretations of such laws.

We believe we are in material compliance with applicable laws and regulations, but we cannot predict the effect on operations of the enactment of additional regulations in the future.

See “Risk Factors” for a discussion of risks related to governmental regulation of our business.

Information about our Executive Officers of the Registrant

The following table sets forth information with respect to each executive officer as of both Denny’s Corporation and Denny's Inc.:the filing date of this report:

Mr. BodeDunn has been SeniorExecutive Vice President and Chief OperatingGlobal Development Officer since October 2014.April 2021. He previously served as Senior Vice President Operations from January 2013 to October 2014, as Divisional Vice President, Franchise Operations from January 2012 to January 2013 and as Vice President, Operations Initiatives from March 2011 to January 2012.

Mr. FlemmingGilmore has been Senior Vice President, Chief Accounting Officer and Corporate Controller since February 2021. He previously served as Vice President, Chief Accounting Officer and Corporate Controller from May 2007 to February 2021.

Ms. Sharps Myers has been Executive Vice President, Chief Legal & Administrative Officer and Corporate Secretary since February 2024. She previously served as Executive Vice President, Chief Legal Officer and Corporate Secretary from August 2023 to February 2024, as Executive Vice President, Chief Legal Officer, Chief People Officer and Corporate Secretary from February 2021 to August 2023 and as Senior Vice President, General Counsel and Chief Legal Officer since March 2009. He previouslyCorporate Secretary from June 2020 to February 2021. Prior to joining the Company, she served as Executive Vice President, General Counsel, Chief Compliance Officer and Secretary of American Tire Distributors, Inc. from May 2018 to May 2020, as Senior Vice President, General Counsel and Chief Legal OfficerSecretary at Snyder’s-Lance, Inc. from June 2008January 2015 to March 2009.

Mr. Patra has been Executive Vice President, Chief InformationDigital and Technology Officer since April 2017.October 2023. Prior to joining the Company, he served as Chief Information Officer and Senior Vice President of IT at Red Robin Gourmet Burgers, Inc. from October 2015 to April 2017 and Chief Information Officer and Senior Vice President of IT of CEC Entertainment,at Brinker International, Inc. (an operator and franchisor of Chuck E. Cheese’s and Peter Piper Pizza) from May 2011 to February 2015.(where he worked for about 15 years).

Mr. MillerMs. Valade has been Chief Executive Officer since September 2022. She joined the Company first serving as Chief Executive Officer and President since February 2011.from June 2022 to September 2022 and became a member of our Board of Directors in July 2022. Prior to joining the Company, heshe served as Chief Executive Officer of Red Lobster from August 2021 to April 2022, as Chief Executive Officer and President of Taco Bueno Restaurants, Inc. (an operatorBlack Box Intelligence (the leading data and franchisorinsights provider of quick service Mexican eateries)workforce, guest, consumer and financial performance benchmarks for the hospitality industry) from 2005January 2019 to February 2011.July 2021, and as Chili’s Brand President from June 2016 to October 2018.

Ms. Van PeltMr. Verostek has been Executive Vice President and Chief Financial Officer since February 2021. He previously served as Senior Vice President and Chief PeopleFinancial Officer since October 2014. She previously servedfrom February 2020 to February 2021, as Vice President, Human Resources from October 2008 to October 2014.

Available Information

 

We make available free of charge through our website at investor.dennys.com (in the SEC Filings section) copies of materials that we file with, or furnish to, the Securities and Exchange Commission (“SEC”), including our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports, as soon as reasonably practicable after we electronically file such materials with, or furnish them to, the SEC. The SEC also maintains an internet website at www.sec.gov that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC. In addition, we have made available on our website (in the Corporate Governance - Code of Conduct section) our code of ethics entitled “Denny’s Code of Conduct” which is applicable to the Company’s Chief Executive Officer, Chief Financial Officer, Chief Accounting Officer and Corporate Controller, all other executive officers, and key financial and accounting personnel as well asand each salaried employee of the Company.

We will post on our website any amendments to, or waivers from, a provision of the Denny’s Code of Conduct that applies to the Chief Executive Officer, Chief Financial Officer, Chief Accounting Officer and Corporate Controller or persons performing similar functions, and that relates to (i) honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships; (ii) full, fair, accurate, timely, and understandable disclosure in reports and documents that we file with, or submit to, the SEC and in other public communications made by us; (iii) compliance with applicable governmental laws, rules and regulations; (iv) the prompt internal reporting of violations of Denny’s Code of Conduct to an appropriate person or persons identified in the code; or (v) accountability to adherence to the code.

 

Various risks and uncertainties could affect our business. Any of the risk factors described below or elsewhere in this report or our other filings with the SEC could have a material and adverse impact on our business, financial condition and results of operations. In any such event, the trading price of our common stock could decline. It is not possible to predict or identify all risk factors. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may also impair our business operations.

A decline in general economic conditions could adversely affect our financial results.

Consumer spending habits, including discretionary spending on dining at restaurants such as ours, are affected by many factors including:

Weakness or uncertainty regarding the United States economy, both domestic and international, as a result of reactions to consumer credit availability, increasing energy prices, inflation, increasing interest rates, unemployment, pandemics such as the COVID-19 pandemic, war, terrorist activity or other unforeseen events could adversely affect consumer spending habits, which may result in lower restaurant sales.operating revenue.

The restaurant business is highly competitive, and if we are unable to compete effectively, our business will be adversely affected.

 

Our returns and profitability of our restaurants may be negatively impacted by a number of factors, including those described below.

 

Food service businesses and the performance of our individualcompany and franchised restaurants may be materially and adversely affected by factors such as:

 

Dependence on frequent deliveries of fresh produce and other food products subjects food service businesses to the risk that shortages or interruptions in supply caused by adverse weather, food safety warnings, animal disease outbreak or other conditions beyond our control could adversely affect the availability, quality and cost of ingredients. Our inability to effectively manage supply chain risk could increase our costs and limit the availability of products critical to our restaurant operations.

In addition, the food service industry in general, and our results of operations and financial condition in particular, may be adversely affected by unfavorable trends or developments, such as:

 

Operating results that are lower than our current estimates may cause us to incur impairment charges on certain long-lived assets and potentially close certain restaurants.

The financial performance of our franchisees can negatively impact our business.

As we are heavily franchised, our financial results are contingent upon the operational and financial success of our franchisees. We receive royalties, advertising contributions and, in some cases, lease payments from our franchisees. While our franchise agreements are designed to require our franchisees to maintain brand consistency, the significant percentage of franchise-operated restaurants may expose us to risks not otherwise encountered if we maintained ownership and control of the restaurants. If our franchisees do not successfully operate their restaurants in a manner consistent with our standards, or if customers have negative experiences due to issues with food quality or operational execution at our franchised locations, our brandbrands could be harmed, which in turn could negatively impact our business. Additional risks include include:

If a significant number of franchisees become financially distressed, it could harm our operating results. For 2017,2023, our ten largest franchisees accounted for 31%approximately 38% of our total franchise and license revenue. The balance of our franchise revenue iswas derived from the remaining 248224 Denny’s and Keke’s franchisees.

The locations where we haveof company and franchised restaurants may cease to be attractive as demographic patterns change.

 

The success of our ownedcompany and franchised restaurants is significantly influenced by location. Current locations may not continue to be attractive as demographic patterns change. It is possible that the neighborhoodeconomic or economicother conditions where our restaurants are located could decline in the future, potentially resulting in reduced sales at those locations.

Our future success significantly depends on the continued services and performance of our key management personnel. Our future performance will depend on our ability to attract, motivate and retain these and other key officers and key team members, particularly regional and area managers and restaurant general managers. Competition for these employees is intense.

The expansion of the Denny’s brand into international markets may present increased risks due to lower customer awareness of our brand, our unfamiliarity with those markets and other factors.

We are subject to governmental regulations in our international markets impacting the way we do business with our international franchisees. These include antitrust and tax requirements, anti-boycott regulations, import/export/customs and other international trade regulations, the USA Patriot Act and the Foreign Corrupt Practices Act. Failure to comply with any such legal requirements could subject us to monetary liabilities and other sanctions, which could adversely impact our results of operations and financial condition.

Litigation may adversely affect our business, financial condition and results of operations.

We are subject to the risk of, or are involved in from time to time, complaints or litigation brought by former, current or prospective employees, customers, franchisees, vendors, landlords, regulatory agencies, shareholders or others. We assess contingencies to determine the degree of probability and range of possible loss for potential accrual in our financial statements. An estimated loss contingency is accrued if it is probable that a liability has been incurred and the amount of loss can be reasonably estimated. Because lawsuits are inherently unpredictable and unfavorable resolutions could occur, assessing contingencies is highly subjective and requires judgments about future events. We regularly review contingencies to determine the adequacy of the accruals and related disclosures. However, the amount of ultimate loss may differ from these estimates. A judgment that is not covered by insurance or that is significantly in excess of our insurance coverage for any claims could materially adversely affect our financial condition or results of operations. In addition, regardless of whether any claims against us are valid or whether we are found to be liable, claims may be expensive to defend, and may divert management’s attention away from operations and hurt our performance. Further, adverse publicity resulting from claims may harm our business or that of our franchisees.

Food safetyOur amended and quality concernsrestated by-laws provide that the Court of Chancery of the State of Delaware will be the exclusive forum for certain types of actions and proceedings that may negativelybe initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, employees or agents.

Numerous government regulations impact our business, and profitability.our failure to comply with them could adversely affect our business.

 

A substantial number of our employees are paid the minimum wage. Accordingly, increases in the minimum wage or reportsdecreases in the allowable tip credit (which reduces wages deemed to be paid to tipped employees in certain states) increase our labor costs. We have attempted to offset increases in the minimum wage through pricing and various cost control efforts; however, there can be no assurance that we will be successful in these efforts in the future.

The operation of food-our franchisee system is also subject to regulations enacted by a number of states and rules promulgated by the Federal Trade Commission. Due to our international franchising, we are subject to governmental regulations throughout the world impacting the way we do business with our international franchisees. These include antitrust and tax requirements, anti-boycott regulations, import/export/customs and other international trade regulations, the USA Patriot Act and the Foreign Corrupt Practices Act. Additionally, given our significant concentration of restaurants in California, changes in regulations in that state could have a disproportionate impact on our operations. If we or water-borne illness,our franchisees fail to comply with these laws and regulations, we or our franchisees could be subjected to restaurant closure, fines, penalties and litigation, which may be costly and could adversely affect our results of operations and financial condition. In addition, the future enactment of additional legislation regulating the franchise relationship could adversely affect our operations.

We have implemented applicable aspects of The Patient Protection and Affordable Care Act and the Health Care and Education Affordability Reconciliation Act. However, the law or other food safetyrelated requirements may change.

Existing and changing legal and regulatory requirements, as well as an increasing focus on environmental, social and governance issues, food contamination or tampering, employee hygiene and cleanliness failures, improper employee conduct, or presence of communicable disease at our restaurants or suppliers could lead to product liability or other claims. Such incidents or reports could negativelyadversely affect our brand, business, results of operations and reputation,financial condition.

There has been increasing public focus by investors, environmental activists, the media and governmental and nongovernmental organizations on social and environmental sustainability matters, including packaging and waste, animal health and welfare, human rights, climate change, greenhouse gases and land, energy and water use. As a decreaseresult, not only have we experienced increased pressure from our shareholders but they now have a heightened level of expectation for us to provide expanded disclosure and make commitments, establish goals or set targets with respect to various environmental and social issues and to take the actions necessary to meet those commitments, goals and targets. If we are not effective in customer traffic resulting from these reportsaddressing social and environmental sustainability matters, consumer trust in our brand may suffer. In addition, the actions needed to achieve our commitments, goals and targets could negatively impactresult in market, operational, execution and other costs, which could have a material adverse effect on our revenuesresults of operations and profits. Similar incidentsfinancial condition. Our results of operations and financial condition could be adversely impacted if we are unable to effectively manage the risks or reports occurring at other restaurant brands unrelatedcosts to us, our franchisees and our supply chain associated with social and environmental sustainability matters.

Being liable as a joint employer could likewiseadversely affect our business

Joint employer status is a developing area of franchise and labor and employment law that could be subject to changes in legislation, administrative agency interpretation or jurisprudential developments that may increase franchisor liability in the future. In October 2023, the National Labor Relations Board issued a new rule that would allow a party asserting a joint-employment relationship to establish joint-employer status by using evidence of indirect and reserved forms of control bearing on an employee’s essential terms and conditions of employment. Under this broader standard, which goes into effect on February 26, 2024, we could potentially be liable for unfair labor practices and other violations by franchisees or we could be required to conduct collective bargaining negotiations regarding employees of franchisees, who are independent employers. In such event, our operating costs may increase as a result of required modifications to business practices, increased litigation, governmental investigations or proceedings, administrative enforcement actions, fines and civil liability. Employee claims that are brought against us as a result of joint employer standards and status may also, in addition to legal and financial liability, create negative publicity which could negatively impact consumer behavior towards us. In addition, if a regional or global health pandemic occurs, depending upon its location, duration and severity, our business could be severely affected.

If our internal controls are ineffective, we may not be able to accurately report our financial results or prevent fraud.

Our management is responsible for establishing and maintaining effective internal control over financial reporting. Internal control over financial reporting is a process to provide reasonable assurance regarding the reliability of financial reporting for external purposes in accordance with accounting principles generally accepted in the United States. We maintain a documented system of internal controls which is reviewed and tested by the company’sCompany’s full time Internal Audit department. The Internal Audit department reports directly to the Audit and Finance Committee of the Board of Directors. Because of its inherent limitations, internal control over financial reporting is not intended to provide absolute assurance that we would prevent or detect a misstatement of our financial statements or fraud. Any failure to maintain an effective system of internal control over financial reporting could limit our ability to report our financial results accurately and timely or to detect and prevent fraud. A significant financial reporting failure or material weakness in internal control over financial reporting could cause a loss of investor confidence and decline in the market price of our common stock.

A change in accounting standards can have a significant effect on our reported financial results. New pronouncements and varying interpretations of pronouncements have occurred and may occur in the future. Changes to existing accounting rules or the questioning of current accounting practices may adversely affect our reporting financial results. Additionally, generally accepted accounting principles and related accounting pronouncements, implementation guidelines and interpretations are highly complex and involve many subjective assumptions, estimates and judgments by us. Changes in these principles or their

interpretations or changes in underlying assumptions, estimates and judgments by us could significantly change our reported or expected financial performance.

Many factors, including those over which we have no control, affect the trading price of our common stock.

 

Factors such as reports on the economy or the price of commodities, as well as negative or positive announcements by competitors, regardless of whether the report directly relates to our business, could have an impact on the trading price of our common stock. In addition to investor expectations about our prospects, trading activity in our common stock can reflect the portfolio strategies and investment allocation changes of institutional holders, as well as non-operating initiatives such as our share repurchase programs. AnyEvolving business strategies or any failure to meet market expectations whether for same-store sales, restaurant unit growth, earnings per share, or other metrics could cause our share price to decline.

 

None.

 

 

We have generally been able to renew our restaurant leases as they expire at then-current market rates. The remaining terms of leases range from less than one to approximately 4539 years, including optional renewal periods. In addition to the restaurant properties, we own

Our corporate offices include an owned building in Spartanburg, South Carolina and leased buildings in Irving, Texas and in Orlando, Florida. The Spartanburg office is an 18-story, 187,000 square foot office building in Spartanburg, South Carolina, which serves as our corporate headquarters. Our corporate offices currentlywhere we occupy 1716 floors of the building, with a portion of the building leased to others.

 

See Note 10 to our Consolidated Financial Statements for information concerning encumbrances on substantially all of our properties.

 

There are various claims and pending legal actions against or indirectly involving us, incidental to and arising out of the ordinary course of the business. In the opinion of management, based upon information currently available, the ultimate liability with respect to these proceedings and claims will not materially affect the Company'sCompany’s consolidated results of operations or financial position. We record legal settlement costs as other operating expenses in our Consolidated Statements of Income as those costs are incurred.

 

 

Not applicable.

 

PART II

 

 

Market Information

 

 

Dividends and Share Repurchases

Our credit facility allows for the payment of cash dividends and/or the repurchase of our common stock, subject to certain limitations and continued maintenance of all relevant covenants before and after any such payment of any dividend or stock purchase. An annual aggregate amount is available for such dividends or stockshare repurchases as follows: