restaurants

Denny's: Another 2 Million Free Grand Slams Served

Denny's (Photo: Business Wire)

The dishes had barely been cleared when Denny's issued a press release announcing that it had served approximately 2 million free Grand Slams during its second breakfast giveaway yesterday -- roughly the same number served in the chain's first post-Super Bowl giveaway last year.

Denny's estimated that tables turned every 15 minutes and that some restaurants served more than 200 breakfasts per hour -- a rate apparently greater than last year's average, although that increase "was offset by bad weather across the country." The promotion ran between 6 a.m. and 2 p.m.

Denny's CEO Nelson Marchioli proclaimed the event "a great day for Americans" as well as for the chain. "We received an outpouring of the most genuine and heartwarming comments from our guests, servers and managers," he added. "We hope to continue to connect with our guests with real affordable offers all year long so they can fall in love with Denny's again."

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While cynics (or competitors, anyway) might quibble about a note of hyperbole, the promotion's success on multiple levels would seem to give Denny's the right to crow a bit.

Denny's reported that its Web site has gotten about 49 million hits since its late January announcement of this year's giveaway day -- including nearly 24 million since its Super Bowl spots promoting the event. The chain was also a top 10-trending topic on Twitter during the Bowl's fourth quarter and yesterday's Grand Slam promotion.

In addition, the chain has racked up 300,000 registrants for its new rewards program, in part through another freebie offer: The first 500,000 fans who register by Feb. 14 get a free burger and fries.

Denny's' investment for three 30-second Super Bowl commercials starring soon-to-be-overworked chickens was obviously significant (half-minute spots reportedly went for $2.5 million-$2.8 million this year), but seems to have paid off in popularity, as well as traffic. The tongue-in-beak spots -- two of which were devoted to the breakfast giveaway day -- ranked 18th, 27th and 38th among the 65 commercials aired, according to USA Today's annual SB ad meter.

But the big payoffs of the freebie promotion are the press coverage/ publicity and potential for winning new customers. Last year, the promotion cost $5 million and generated the equivalent of about $50 million in "free" publicity, according to Denny's. Furthermore, the costs are offset -- probably to a large degree -- by freebie meal seekers' purchases of coffee and other beverages.

Even with the Grand Slam giveaway, heavy marketing and innovations like its Allnighter offerings for the young adult crowd, Denny's has not been immune to the downward pressures being felt by full-service restaurants in particular.

In its fiscal third quarter ending last September, it saw same-store sales declines of 6.6% in company-owned units and 7.3% in franchise stores. (According to The NPD Group, the mid-scale full-service restaurant sector of which Denny's is a part saw traffic drop 5% last year, versus a 3% decline for the overall industry.)

Still, the chain's net income through the first three quarters was up nearly 33% versus prior-year same period, to $23.7 million (on total sales of $467.6 million), and per-share net was $0.25, versus Q3 '08's $0.19.

Earlier this month, CEO Marchioli told Bloomberg that after a strong first quarter following last year's giveaway promotion, Denny's "lost some of that stickiness with consumers as the year went on." Buying the third Super Bowl commercial, which promoted a free breakfast for diners on their birthdays, was viewed as a way to extend the promotion's momentum, he said.

The free Grand Slam day has proven to be "very shrewd," observed Bruce Watson, writing at DailyFinance.com. "Last year, it propelled a short-term 22% uptick in the stock. This year, it has already resulted in a quick 6% improvement. And in the longer run, the move will draw customers into the restaurant, improve public relations, and reacquaint Denny's fans with the chain's offerings. The impact of those trends may be almost immeasurable. It almost makes you wonder why more companies don't give their product away."

1 comment about "Denny's: Another 2 Million Free Grand Slams Served ".
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  1. Kevin Horne from Lairig Marketing, February 12, 2010 at 12:21 a.m.

    Very interesting commentary from Bruce Watson. He must not have done any research into what happened to Denny's business after last year's promo (as the author was kind enough to include in the paragraphs above his "predictions"). For a stock that's stuck in a range between $2 and $3, one might guess he has another reason (motive) to be so positive?

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