Denny's Corporation

Hey, and welcome to the Denny's Corporation fourth quarter and fiscal year 2021 earnings call. Today's conference is being recorded. At this time, I would like to turn the conference over to Kurt Nichols, Vice President, Investor Relations and Financial Planning and Analysis. Please go ahead, sir.

Thank you, Jess, and good afternoon, everyone. Thank you for joining us for Denny's fourth quarter 2021 earnings conference call. With me today for management are John Miller, Denny's Chief Executive Officer, Mark Wolfinger, Denny's President, and Robert Verostik, Denny's Executive Vice President and Chief Financial Officer. Please refer to our website at investor.denny's.com to find our fourth quarter earnings press release along with the reconciliation of any non-GAAP financial measures mentioned on this 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 operating hours, staffing levels, and development. Then Robert will provide a recap of our fourth quarter financial results before commenting on our guidance. After that, we will open it up for questions. Before we begin, Let me remind you that in accordance with the safe harbor provisions 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 ended December 30th, 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 am incredibly pleased with the sales progression we've experienced early in the fourth quarter with domestic system-wide same-store sales increasing from 1% above 2019 sales levels in October to 4% above 2019 sales levels in November. We also experienced growth in all sales channels with on-premise sequentially growing nearly 3% and off-premise promotions contributing to over 5% of sequential growth. This reaffirms that consumer demand remains high through both thriving dine-in transactions when COVID case counts are normalized and the ongoing stickiness of our off-premise channels. The full-service restaurant industry experienced same-store sales deceleration during the last two weeks of December due to the rise in Omicron cases, and Denny's was no exception. Additionally, we were impacted by the holiday mismatches during December, with Christmas and New Year's falling on the weekend where we are typically at capacity, comparing to a weekday in 2019, where we experienced greater upside potential. The Omicron variant impact continued into January as well. However, as cases have now begun to decline, our sales are gaining momentum once again. We also have a few tailwinds that gave us confidence in our longer-term outlook. With our latest investment in brand-wide recruiting, we have made it much easier for job seekers to apply for positions at Denny's restaurants, company, and franchise. through our new career website and we are experiencing increased candidate flow as a result. We're excited to offer opportunities for career growth and a love for serving people. This is exemplified by our recent recognition as one of only two restaurant brands in the top 100 most loved workplaces for 2021 by Newsweek and Best Practices Institute. Additionally, the consumer remains in a generally healthy position right now despite inflationary pressures. While we continue to offer value items, guests are increasingly willing to pay for the full-service dining experience they have missed over the last two years. Turning to our recently announced strategic initiatives, we are progressing on the rollout of our new kitchen modernization initiative, as well as our new cloud-based restaurant technology platform across the domestic system. And both of these are expected to enhance the guest experience and drive operational efficiencies, while kitchen equipment while the kitchen equipment also provides the ability to enhance our menu offerings across all day parts. We have implemented our Heritage 2.0 Remodel Restart Program, which generated mid-single-digit sales lifts during the testing prior to the pandemic. We also have two new domestic development commitment drivers, our partnership with Reef for ghost kitchens and our upfront cash incentive for domestic development. These strategic initiatives, along with the management team dedicated to supporting our franchisees, led to another prestigious award from Entrepreneur Magazine as the top franchise in our category. I would also like to mention how proud I am of our brand and the amazing progress we have made with regards to diversity, equity, and inclusion. And we continue to give back to the communities we serve through our Hunger for Education Scholarship Program, our partnerships with No Kid Hungry, and St. Jude's Children's Research Hospital and our mobile relief diner. In closing, the last two years have been unlike anything we have ever experienced, but I'm so proud of our teams and our franchisees for their commitment and dedication to this brand. The future ahead at Denny's is bright, and I'm so thankful to be a part of such a dynamic, innovative, and agile brand. With that, I'll turn the call over to Mark Wolfinger, our Denny's president.