Denny's Corporation

Good day, and welcome to the Denny's Corporation Q2 2021 Earnings Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Curt Nichols, Vice President of Investor Relations and Financial Planning and Analysis. Please go ahead.

Thank you, and good afternoon, everyone. We appreciate you joining us for Denny's second quarter of 2021 Earnings Conference Call. With me today for management are John Miller, Denny's Chief Executive Officer, Mark Wolfinger, Denny's President, and Robert Garostin, Denny's Executive Vice President and Chief Financial Officer. Please refer to our website at investor.denny's.com to find our second quarter earnings press release along with reconciliation of any non-GAAP financial measures mentioned on the call today. This call is being webcast and an archive of the webcast will be available on our website later today. John will begin today's call with a business update. Mark will then provide some comments around restaurant capacities and franchisees and development. And Robert will provide a recap of our second quarter financial results and current trends. After that, we will open it up for questions. Before we begin, let me remind you that in accordance with the St. Barbara's provision of the Private Securities Litigation Reform Act of 1995, The company knows that certain matters to be discussed by members of management during this call may constitute forward-looking statements. Management urges caution in considering its current trends and any outlook on earnings provided during this call. Such statements are subject to risk, uncertainties, and other factors that may cause the actual performance of Denny's to be materially different from the performance indicated or implied by such statements. Such risks and factors are set forth in the company's most recent annual report on Form 10-K for the year end of December 30, 2020, and in any subsequent Forms 8-K and quarterly reports on Form 10-Q. With that, I will now turn the call over to John Miller, Denny's Chief Executive Officer.

Thank you, Curt, and good afternoon, everyone. I do hope that each of you have remained safe and healthy since we last shared an update. on Denny's, and we are very encouraged by our second quarter domestic system-wide same-store sales results, which achieved approximately 99% of 2019 levels, despite staffing challenges that have hindered our ability to return to 24-7 operations across our system. This performance included same-store sales of 1.9% above 2019 levels at our company restaurants for the second quarter, as tourism and travel are gaining momentum. I'm even more encouraged by the stickiness of our Denny's base brand off-premise business, which has grown from its pre-pandemic trend of 12% to over 20% during the second quarter. Additionally, we are seeing an incremental 3% of average weekly sales through our two new virtual brands, the Burger Den and the Meltdown. We're very pleased the positive sales momentum continued in July with preliminary domestic system-wide same-store sales 2.7% above 2019 levels, including 2.4% at domestic franchise locations and 6% at company locations. Furthermore, approximately half of the domestic system generated positive sales in the month of July, and each of our top four states were positive as well. These results are a testament to the hard work and dedication of our teams, safely welcoming guests back into our dining rooms while remaining focused on growing our off-premise business. Our teams have accomplished this while enduring industry-wide staffing challenges that have impacted our ability to execute at our highest potential, especially during our late-night day part. However, we are excited and encouraged by our recent America's Dining hiring tour. We deployed our mobile relief diner that typically supports people during hardships, such as natural disasters, to bring awareness to our hiring efforts. This week-long tour with our new career website that includes open positions for all company and franchise restaurants in one centralized location supported our efforts to recruit applicants for over 20,000 open positions in our restaurants. We remain focused on our four key guest-centric themes. These are reassurance, value, comfort, and convenience, and I'll now touch briefly on each of these. As guests return to our restaurants, it is more important than ever that we ensure the health and safety of our teams and guests. So we are committed to reassuring our guests that Denny's provides a safe dining experience by consistently executing our enhanced cleanliness and sanitation procedures at all consumer touch points, a point of great importance in light of recent surges in COVID cases across the country. And our second area of focus is value. We understand that value comes in different forms and has a different meaning for each type of guest. We consider our value approach to be a comprehensive balance between price, abundance, convenience, and bundle value. And our third focus is comfort. We strive to ensure that Denny's is a place where our guests feel welcomed and valued. Whether dining with a large family or as a party of one, we believe our guests view the Denny's experience as a time to build connections in an environment that is both inviting and comfortable with consistent and reliable service. Our final area of consumer focus is convenience. We believe guests will continue to expect technology to bring enhanced value to their dining experience, whether in our restaurants or through off-premise options like our well-established Denny's on-demand platform and that of our two new virtual brands. Our first virtual brand, the Burger Den, is live in over 1,100 locations and allows us to focus on one of our strengths, great burgers, with new varieties using ingredients that are already in the pantry. Our second virtual brand, called the Meltdown, is a DoorDash-exclusive brand that features handcrafted sandwich melts with fresh ingredients and unique flavor combinations. While this brand can utilize approximately 70% of the items currently in our pantry, our innovative culinary teams have crafted new, craveable products with the addition of some new premium ingredients. We started the rollout of the meltdown in April to approximately half of our domestic system and expect to be substantially complete during the third quarter. Robert will give more specifics on the performance of these brands. However, we believe these transactions are highly incremental and leverage underutilized labor to maximize kitchen efficiency. Furthermore, these brands provide opportunities not only at dinner and late night to leverage underutilized labor and kitchen space, but we're also seeing a meaningful number of transactions during the week versus the weekend. In closing, it's amazing how far we have come since the beginning of the pandemic. Many things have changed in the restaurant industry, but one thing remains the same. We're still the place where people come in, sit down, and connect with one another over great food. And despite near-term labor challenges that will subside in due course, our sales have now surpassed pre-pandemic levels. We have launched two new virtual brands, driving incremental traffic during underutilized day parts, and we still believe there are market share opportunities on the horizon. We have an extraordinary group of dedicated franchisees and an exceptional Denny's team, which makes me very optimistic about the future of this brand. With that, I'd like to turn the call over now to Mark Wolfinger, Denny's president, to discuss more about our franchisees and development.