Struggling to maintain worth during turbulent circumstances for Denny's diner
Denny's Embraces Value-Driven Strategy Amid Economic Challenges
Denny's, the popular family-dining chain, has reported a slight decline in same-store sales for the second quarter of 2025, with a 1.3% drop compared to the previous quarter. However, this decline represents an improvement from the first three months of the year, where same-store sales slid by 3%.
The economic challenges faced by Denny's core customers—households earning between $50,000 and $70,000 a year—have prompted the company to emphasize value-driven offerings. These efforts include the $2 $4 $6 $8 menu, BOGO breakfast deals, and a new lineup of Slam breakfasts priced under $10. This strategy, launched in 2023, aims to offset inflation, rising interest rates, and a difficult job market impacting these customers.
The focus on value has proven successful, with value items representing 20% of orders in Q2 2025. The strongest sales gains have come from the $50,000–$70,000 income segment. Although same-store sales were down 1.3% in Q2, these value promotions have helped stabilize performance amid broader economic pressures.
In addition to value pricing, Denny’s is investing in a new digital loyalty program leveraging first-party data to deliver personalized promotions and improve guest engagement. This program, planned for launch in late 2025, aims to drive traffic growth and higher-margin sales through targeted, behavior-driven offers rather than broad discounts, further supporting customer retention and sales stability.
However, some challenging regional markets, such as Los Angeles, San Francisco, Houston, and Phoenix, have moderated overall sales growth, contributing to the slight same-store sales decline noted in Q2 2025.
Despite these efforts, Denny’s CEO Kelli Valade stated that people earning between $50,000 and $70,000 a year have been affected by inflation, rising interest rates, and a weak job market, making them less likely to visit Denny's. The company is encouraged by the response to its offers and the improvement in sales among the $50,000-$70,000 income bracket, but the CEO stated that the macroeconomic environment moderating will be what they need to completely overcome the "choppy" backdrop.
Off-premise accounted for 21% of sales in the second quarter, and off-premise same-store sales ticked up 1.5%. Denny's has also introduced Nathan's Famous Hot Dogs, a delivery-only virtual brand, which is now in 70% of Denny's company-owned stores and contributed 50 basis points to same-store sales at company-owned Denny's in the quarter.
Meanwhile, Denny's competitor Keke's has reported a different story, with same-store sales rising 4% in the quarter and eight new locations opening. Keke's operations, speed, the addition of alcohol, and growing off-premise sales are cited as reasons for the improvement at Keke's.
Denny's is considering making Nathan's an option for franchisees, joining its other virtual brands, The Meltdown and Banda Burrito. The new Denny's loyalty program, set to launch later this quarter, is expected to contribute 50 to 100 basis points in traffic over time.
In June, Denny's replaced the buy one, get one offer with a selection of Slam breakfasts for under $10. The four under $10 menu at Denny's has been generating similar levels of traffic from new and lapsed users as the BOGO. Denny's ran a buy one, get one offer for Grand Slam or All-American Slam breakfasts in the second quarter, which drove traffic from new and lapsed users, and 15% of whom have returned since.
In conclusion, Denny's value-oriented strategy addressing economic hardship among middle-income customers has helped reduce sales declines and improve customer engagement, though same-store sales have not fully rebounded to growth as of mid-2025. The company remains optimistic about the future, with plans to launch a new digital loyalty program and consider adding Nathan's as a virtual brand for franchisees.
- Denny's is investing in a new digital loyalty program that utilizes first-party data to deliver personalized promotions and boost guest engagement, with the goal of driving traffic growth and higher-margin sales through targeted, behavior-driven offers.
- To offset economic challenges facing its core customers, particularly rising inflation, interest rates, and job market difficulties, Denny's has launched value-driven offerings such as the $2 $4 $6 $8 menu, BOGO breakfast deals, and a Slam breakfast lineup under $10.
- Amidst a focus on value pricing, Denny's is also exploring the possibility of making Nathan's Famous Hot Dogs available to franchisees, adding to their existing virtual brands, The Meltdown and Banda Burrito, as a means to drive sales and attract customers.
