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How Denny's Returned to the Top 10 Franchises List

A focus on value and franchising helped the system turn its business around.

This story appears in the January 2011 issue of Entrepreneur. Subscribe »

Technically, Denny's is not new to the Franchise 500®'s Top 10, but considering that was still in the the last time the quaint, beloved restaurant chain made an appearance, we thought we'd celebrate the company's return.

So what has put Denny's back in the top -- No. 10 on the Franchise 500® list--after a quarter century? Simply put, it became a franchise company. Though the chain has been since 1963, it was always a corporate-heavy operation, splitting its time between operating company units and dealing with franchisees. That divided focus wasn't satisfying franchisees or franchisors.

Steve Dunn, Denny's vice president of development, says over the last three years Denny's has restructured its franchise model through its Franchise Growth Initiative, franchising 301 corporate-owned stores since 2007, with 70 more to refranchise.

"This is a key philosophical shift in how we operate. Everything we do has to support our franchisees in a meaningful way, and that's something different for Denny's," says Dunn, who adds that the company's 1,600-plus locations are now almost 90 percent franchisee-owned.

"We've looked at our operations, our development, our food and procurement systems, and our co-ops to make sure they support franchisees."

The commitment to franchising has attracted some heavy hitters to Denny's table, including new COO Robert Rodriguez, the former Dunkin' Donuts president, hired in August. And the largest franchisees for Jack in the Box, Carl's Jr. and Long John Silver's have all bought into the system. A buyout of 140 Flying J Travel Centers that are being converted to Denny's means that by next year, the Grand Slam will be the most common breakfast on America's highway system.

But the other part of Denny's success equation is its marketing. In 2009 the company made a huge gamble and shelled out for a television commercial, offering everyone in the United States a free Grand Slam breakfast that following Tuesday (if they were willing to wait). Almost 2 million customers took Denny's up on the offer.

"That Super Bowl promotion reintroduced us to America and to our lapsed customers who hadn't been here for a while," Dunn says. "It created good will at a time when people needed a shot in the arm, and certainly gave people a new understanding about what our brand is all about."

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