Denny's set to shut more locations in 2025: Reasons you need to know

Denny's is closing more locations than initially planned.

After announcing in 2024 that it would shut down 150 low-performing restaurant locations, the company has now increased the total to nearly 180 closures across 2024 and 2025. Around 88 locations were already closed last year, and another 70 to 90 are set to shut their doors in 2025.

However, the company has not released a specific list of locations. Denny's executives say that many of the affected outlets are older restaurants with expiring leases or locations that are no longer profitable. Moreover, the decision to close is part of the chain's effort to improve franchisee cash flow and reinvest in remodeling initiatives to attract more customers.

Rising inflation, changing consumer habits, and increased competition from fast food and dining chains are also believed to have contributed to Denny's struggles.

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Per Fast Company, the chain's CEO Kelli Valade said in an earnings statement,

"We have made significant progress in our strategy to enhance the overall health of our flagship brand by accelerating the closure of lower-volume restaurants and completing 23 remodels, and also opened a record number of Keke’s Cafes while expanding into six new states."

She also added,

"Looking ahead to 2025, there is still work to be done within our brands, particularly as we navigate near-term-consumer sentiment that has been affected by macroeconomic factors."

Why is Denny's closing more locations?

Aging restaurants and expiring leases

One of the primary reasons for the closures is the age of many Denny’s locations. Some of these restaurants have been in operation for over 30 years, which has now made them costly to maintain. Rather than invest in renovations, Denny’s is opting to close underperforming stores and focus on locations with relatively stronger revenue potential.

Changing consumer habits

Moreover, the way people dine out has changed in recent years. More customers now prefer takeout and delivery options over traditional sit-down dining, per recent reports.

This shift has hit chains like Denny’s, which rely majorly on in-person dining. To adapt, the company is reducing its menu from 97 to 46 items and moving away from its longstanding 24/7 service model in some locations.

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Increasing inflation and food costs

Inflation has made dining out more expensive for consumers and more costly for restaurants to operate. Food prices, especially breakfast staples like eggs, have surged due to supply chain disruptions and bird flu outbreaks.

Waffle House, one of Denny's competitors, recently added a $1 surcharge to its egg orders. These rising costs have forced Denny’s to adjust its pricing strategy, which may have driven away some budget-conscious diners.

Stock and financial struggles

Denny's stock has also taken a significant hit. It dropped nearly 50% in the past year. The company’s revenue has also declined, with operating revenue falling from $115.4 million in the previous quarter to $114.7 million, reports claim.

These struggles have made Denny’s leadership take actions like restaurant closures to stabilize the brand.