The rise and fall of Denny's

At its peak, Denny's ran more than 1,600 restaurants and was so powerful that in fact one morning in 2009, it gave away 2 million free breakfasts.

Today, the promise and value proposition that Denny's was built on is basically dead. They've closed over 150 stores and it's no longer traded on the stock market. What's killing Denny's is not what you think and also it's an interesting reflection on what's changing in America, all reflected in your neighborhood diner. This video, as I walk to the gym, is the rise and fall of Denny's.

And oh, by the way, I turn each and every one of these videos into a one-page cheat sheet you can download, curdly.com/youtube. And by the way, thanks to Velotrix for sponsoring this video. More on them later.

The story actually starts not back as a diner. It starts with donuts. In 1953, two entrepreneurs, neither of whom was named Danny, opened a place called Danny's Donuts. One of the partners is named Harold Butler and his whole business strategy was very appropriate for the time. And this was the generation of folks who'd come back from World War II. It was best coffee, best value, work hard, be open all the time, and keep the place spotless.

But in the post-war era, this was when America was speeding up. It was becoming the manufacturing engine of the world, on its way to becoming the greatest, most wealthiest country in the history of humanity. So, we needed stuff that fit that. This particular venue was open 24 hours a day. Harold's partner would leave in 1956, leaving him alone to run the company. And his North Star for the next coming decades was this 24-hour operating idea.

In 1959, they renamed it to Danny's Coffee Shops. But that was a problem. There were a bunch of other things called Da- Coffee Dan and stuff like that. So, they reportedly renamed it Denny's so people weren't confused.

While stuff being open 24 hours a day is pretty normal in America today, back in the 1950s and 1960s, this was an oddball thing to do. It wasn't normal to go out drinking with your buddies then go to some place like Denny's at 3:00 in the morning to eat whatever greasy food you were going to get there. Basically, if you got off work on a late shift or something like that, there was no place to eat that was affordable and still open. So, people that other restaurants didn't even really think about, truckers, people working bus shifts, manufacturers, they would show up at all types of the hours and Denny's was built for them. A lot of these people became regulars. They would come in and get to know the staff that was working there cuz well, they were going through something together, which was they had lives that had them up 4:00 in the morning, 3:00 in the morning just to help feed their families.

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Back then, it was interesting. I've talked on this channel about the idea of the third place, which is a place outside of work and home where you go to socialize and find meeting. For a lot of people, Denny's became that. In this era of the 1950s and '60s when America was rapidly industrializing, meaning it was running, you know, smoke stacks 24 hours a day, Denny's was perfect for that.

Back in the 1960s, it was much easier to go public than it is now. If you're ever interested in something fascinating, look at how difficult it is for companies to IPO. But anyway, that's a different video. And in 1966, Butler took Denny's public. They crossed 1,000 locations in the early 1980s. The growth engine's going. It was perfect. Even in the tough economic times of the 1970s, Denny's was still there, feeding people inexpensively, no reservation required.

Like 7-Eleven, done in this video on this channel, they went international into Japan, which was booming at the time. They partnered with a group there and started to open overseas.

In 1977, they launched what would become the heart of the brand over time, and they did it in Atlanta. It was called the Grand Slam breakfast. You see, just a few years earlier, baseball legend Hank Aaron had broken Babe Ruth's all-time home run record. So, it was two eggs, two sausages, two bacon, two pancakes, a grand slam. Back then, a lot of marketing was just throwing stuff out there and seeing what worked. In this case, tying a product launch to a cultural moment proved to be something that would make this idea timeless of the Grand Slam.

In the next couple years, they would also introduce a thing called Moons Over My Hammy, uh which is a play on a well, basically a movie, I think, at the time, which is Moon Over Miami. Or maybe it was a song, I don't know. But my friends did I remember them ordering in the '90s, crazy. This characterized the personality of Denny's. It was supposed to be a little weird, a place you could go and get food at 3:00 a.m. with your buddies and giggle after you'd drank about 14 beers about the names of some of the stuff on the menu. It definitely wasn't a place that was pretentious.

Unfortunately for this video, I don't have time for a 50-minute deep dive into all the owners through the '80s and '90s, but unlike other chains, Denny's would pass from private equity owner to conglomerate and back and forth, each time with each owner extracting more value and sadly putting more debt on the chain. And as the '90s rolled in, Denny's was a household name. It was peak suburbs. It was the perfect thing to fit into suburban life. You drive up in your car anytime of the day and get a familiar meal with by yourself or with your family.

At this point, Denny had Denny's had an amazing brand, but they're about to do something that was going to destroy it. And that thing was how they treated certain sets of customers. But before we get into that, I want to talk about today's video sponsor, Velotrix. If you own or run a business, you don't need another dashboard to study. You need three things: what's going well, what's going wrong, and what to do next. Velotrix is built to give you exactly that. It's a safe AI finance copilot for business owners and operators. You can connect tools like QuickBooks and Square or upload the files you already use. Velotrix analyzes all of it together. You don't need to dig through reports, Veltris gives you a clear daily health check. It points out what is working and catches problems like cash shortfalls or margin drops. Then it explains why and gives you clear action items. You can also ask, "Sales are up, so why is cash down?" Veltris answers from your actual data and every answer shows where the numbers came from. And it can't change your books or move your money. The starter plan is just $49 a month. That works out to about $1.60 a day. Less than most cups of coffee. You can try for free for 1 month with a health check promo code. Use the link in the description, connect your first source, and see what Veltris finds in your business.

Managers and workers at restaurants, especially across the Southeast, had started to treat African-American customers different than the white ones coming in. Often asking many of them to prepay, and others refusing service. Well, first, 1993, six Secret Service agents are in town in Annapolis, Maryland. They happen to be all black. Some of their white colleagues show up to the Denny's at the same time. The white ones get served immediately. The black ones have to wait an hour, and they get nothing. The rough part is that Denny's management knew about this well up into the 1990s. They just decided to do nothing about it. But here it was. The most embarrassing moment, I think, possible. Corporate owner at the time is a company called Flagstar. They settle for the largest civil rights violation settlement in the history of that act. It'd been over 30 years since it was passed by then. $54 million. The chain, with basically mud on its face and embarrassment, has to change the way it's doing things. And it agrees to anti-discrimination training, all that kind of stuff for staff. It's worth asking, "If management knew about this, where was the management training?" Well, it's a lot of times how big business works. Some people take the blame for other people's problems. And at that moment, Denny's was hitting a problem, which was it had all this debt that had been loaded onto it through all these leveraged buyouts, different owners. It was facing a crisis, and was about to face something even worse. America was changing.

But before I get into that, I'll explain a bit how Denny's actually changed for the better. They decided to transform the whole business, and they did it really in two ways, one from the bottom up, one from the top down. After this embarrassment with the Secret Service agents, they agreed also to increase the amount of minority ownership in all their franchises. And suddenly it was wasn't just a chain of diners that were owned by well, a bunch of rich white dudes. And in about 5 years, they went crazily from a company that was a pariah and seen as a racist chain of diners to one that 5 years later was named by Fortune as the best company to work for as a minority. Remember, this was a different era. It's not like today where you have Gen Z seeing things and like if Five Guys or other chains had posting receipts on the screen and pressure being overwhelming. Back then, it was all about the newspaper and the local news TV. So, a lot of time stories like this got buried. Not in the case of Denny's.

From the top down, the company that was the owner of Denny's, Flagstar, goes through bankruptcy, sheds a bunch of the other brands that it had owned at the time, and renames itself entirely to Advantica, and then eventually becomes all about Denny's, and goes public again with the stock ticker as D E N N, Denny's. The new CEO started to run a lot of the company through the private equity playbook. And the first of those was to take all these corporate-owned stores, and uh well, franchise them. If you're a Denny's shareholder, that's excellent news. What you're looking for as a shareholder is return on invested capital. And by selling off the individual franchises, which is what the CEO did, Marchioli, uh basically the company starts to have less capital deployed, which means every dollar of profit gives you a higher return on investment. Here's something to think about with what this was doing. When you bring on franchises and franchisees, you're essentially creating business partners. And at a certain point, they may either run out of money, get in trouble, do something wrong, or just refuse to do what you want them to do. But in the meantime, this would juice earnings, but later on it's going to come back to bite the chain. So, remember that fact.

2009, we're still in the American monoculture era, where everybody's watching the same stuff and reading the same newspapers. And in that year, they did something crazy. At the Super Bowl, they spent $3 million on a commercial. What was crazy was what they said.

>> This Tuesday from 6:00 a.m. to 2:00, Denny's is giving a free Grand Slam to everyone in America.

Once they were going to give everyone a free Grand Slam breakfast, they had lines out the door. The overall promotion supposedly cost them $12 million in free food and cost to be on the Super Bowl. But something like that could look at first like a huge success. Look at all these people we got to come in and try our product and check out Denny's. But there was a problem with it. Number one, you attract people who are potentially bad customers. Folks who want something for free or just for a handout. We've all dealt with those people in our businesses. A lot of times you're just better off telling them to go to the competitor. But the bigger problem perhaps was that it changed perception of Denny's. Instead of being a place you could go and get good value, suddenly it sent the message that this was a place that didn't put much value on its number one product, the Grand Slam. Let's say later on that America would change and costs would go up and labor would get tighter, and you'd need to raise prices. Suddenly that would create a time bomb with your customers. They would look at you and say, "Well, this is supposed to be cheap food. Why are you raising prices?" But we'll come back to that, too.

I talked earlier in the video about how Denny's entered the 2000s and the 2010s against the backdrop of America that was radically changing. Baby boomer parents had been super excited to take their kids to diners on Saturday or Sunday mornings. They were still part of the sit-down food era. But millennials were starting to be parents, Gen X parents like me were starting to look at the food that was served at a Denny's, pancakes dripped in syrup, waffles that had basically been born in butter, as not being very healthy. At the same time, the idea of parenting had radically changed. Saturday morning were suddenly filled with us taking our kids to soccer practices or planned activities for the whole day. The last thing we had was the ability to go spend 90 minutes to 2 hours trying to sit down and have a sit-down breakfast over the weekend.

America was also de-industrializing to some extent. The idea of the trucker and those types of folks who would be eating a breakfast, sit down in a diner at 3:00 in the morning. A lot of people had changed their jobs to work normal daytime hours. As I'd gone to more of a service economy.

With these changes happening, in 2011, the chain did something fascinating. New CEO John Miller leaned into the 24-hour, always open, always on brand promise that Denny's had had from the beginning. Around 2013, they started to do what a lot of other brands were doing, launching online social media accounts that were just weird. And remember, this was leaning into exactly what had made Denny's great. The Moons Over My Hammy idea, the Grand Slam stuff, just being a little quirky and different. I understand what they were trying to do. They were trying to make Denny's more relatable to millennials, who were, well, let's be real, quirky. But if your brand like Denny's was built on dependability at 3:00 a.m. and being open all the time, perhaps putting out quirky, meme-filled stuff on Tumblr or whatever social network they were using at the time wasn't the right idea to convey to a group of folks looking for something in Denny's they could depend on.

There's something else about Denny's and diners in general that we haven't really talked about. It's the type of food they serve. I did a video on this channel about how Taco Bell didn't was the first chain to see themselves as less of a restaurant and more of a food assembly point. But if you look at Denny's or a diner, it's impossible for them to act and be as efficient as a Taco Bell. Waffles, scrambled eggs, all the different types of stuff, including the dinner food, by the way. I haven't really talked about that. I've been characterizing Denny's as a breakfast place. But all the food that Denny's and diners cook is hugely labor-intensive. Other chains like Outback Steakhouse, who during this time were getting very popular, did things to make it so the people who are working in those kitchens and working in those restaurants had a better quality of life. But diners expect you to be open 24 hours a day, serving anything. As I've talked about before on this channel, birth rates are way down. There are fewer younger people. And if you go to a restaurant like Denny's, it's even harder to fill those kitchen staff, much less the wait staff. Young people often want better jobs. Enslaving away at a kitchen at 4:00 in the morning on a Tuesday night doesn't sound like much fun. Doesn't sound fun to me, either.

By the 2010s, it looked like Denny's was turning around into a huge comeback story. But there was something wrong with all this. They were going back to their very basics, and I loved that they had done that. The problem was they were doing that for a world that had fundamentally changed. There was one more thing I haven't talked about with the world changing then. That thing was Chipotle. Sorry, Chipotle was kind of meant to reflect the entirety of competition. But fast casual was coming. Folks like Panera, Chipotle, they were doing great job bringing healthier things to folks that maybe didn't want to see diner food as healthy at the time. At the same time, every other burger chain and fast food restaurant was coming at Denny's from the bottom. McDonald's had brought out all-day breakfast. They had real estate, and they wanted to make money on it. Fast casual was coming after convenient, quality food served dependably, and coming from the top down for folks like Denny's, and doing it faster. The other end, you had folks like McDonald's coming from the cheaper end, coming directly at what Denny's had done for years, but faster and cheaper.

The late 2010s came around. A lot of these trends started to come to a head. People weren't coming into Denny's well, much at all anymore. 2018 and 2019, that plan to bring in 100% franchising, or close to it, for the chain was nearly done. They were doing nearly half a billion dollars a year in revenue. Story had gone on for a while, probably would have seen Denny's in a long slow decline. Then in March 2020, something else happened.

67 years through recessions, hurricanes, uh different problems in the world, Denny's had stayed open. That was the brand promise. Funny anecdote for Denny's, they had actually stayed open 365 days a year up until the 1990s. Denny's closed for Christmas Day the first time. It was a big problem cuz they couldn't find the locks for the front doors at a number of these restaurants. They had never closed. Every brand has a thing that's basically a brand promise. You're we're going to do a thing and you're going to do a thing. And uh that brand promise tends to be at the core of what the whole thing's about. You see it in a lot of stories on this channel when folks get super angry at brands, it's almost always cuz the brand promise gets broken. Before the COVID pandemic happened, Denny's was the place that you could get great pancakes and a little bit of quirkiness and they'd always be open. And here, it was basically illegal for them to continue that during the COVID pandemic. Revenue went from 489 million in 2019 to 289 million in 2020. Basically a 40% decline. What it did fundamentally was just accelerate what was already happening to Denny's, which was a decline of their entire business model because around it America had changed.

You see, by the 2020s, the idea being open 24 hours a day was already a dying thing. It was going to be killed by the franchisees themselves. Most of them were losing money in their night shifts. Think about it. If you're a franchisee, do you want to be there at 3:00 in the morning slinging pancakes when your staff doesn't show up? No. It's not appealing.

In 2022, they have a new CEO. Her name is Kelly Valade and she goes and buys a new brand, a brunch chain called Keke's Breakfast Cafe. It was 82.5 million dollars spent to buy a chain that was fundamentally the opposite of Denny's. At that moment, how would you feel if you were a Denny's franchisee and they were basically throwing in the towel on your entire business model that you'd bought into, and potentially taking out huge personally guaranteed loans to sell Denny's pancakes. COVID, most franchisees would never even bring back 24-hour service. The whole brand promise was breaking down.

Over 2024 and 2025, all of these headwinds coming to a basically a head inside of Denny's meant that they were closing hundreds of stores, 150 between those 2 years alone. Earlier this year, January 2026, what you imagine was going to happen did happen. A tri-partnership of three private equity firms came in and paid 50% more than the closing price on that day for Denny's stock, and for $620 million decided to take it private. For the first time in over 30 years, it was no longer publicly listed. It had spent 70 years as a public institution, and here it was getting brought under the thumb of private equity overlords.

Watch videos on this channel for Wendy's, Panera, and many of the other ones. Man, I've done a lot of them. Private equity's always involved. Many of you seem to notice that. They seem to run the same playbook over and over again. Cut costs, put lipstick on the pig, raise prices, make customers feel alienated, and then try to flip the thing. And then, one of the things I'm still the most salty about in making videos for this channel is that Panera doesn't actually make bread in their stores anymore. I mean, it's called a bread company. So, I wonder what they're going to do with the eggs at Denny's. No more real eggs, I guess. Who knows?

The thing about Denny's is it was fundamentally built for a world that doesn't exist anymore. If you look at each one of the tailwinds that they had when they started the business, it Well, that United States isn't the United States of the 1950s. We've changed our taste, there's fewer kids, our population pyramid, if you're looking at demography, is totally changed. People's interest in what is healthy and what is not has changed. Uh the entire economy has changed. Denny's became a huge thing because it had massive tailwinds. Now, you see what's happening, massive headwinds. If it was a sailboat, it'd be going backwards. There is nothing wrong with that. The only constant in the business world is change. The only mistake you can make as a business owner is whether you just choose to ignore it. As owner after owner of Denny's did.

All right, I'm almost to the gym. If you thought I did a good job talking about the rise and fall of Denny's, let me know in the comments below. Encourage me to make more, and I'll catch you next time.