• Denny’s plans to close 150 stores to increase annual sales volume due to declining sales.
• Chains that traditionally attract more families, like Red Lobster and Applebee’s, are feeling the pressure.
• “Families have been hit hard by inflation, and so they’re eating out less,” one analyst told Business Insider.

Denny’s The family is the latest victim of a crackdown on food chains, announcing this week that it plans to close nearly 150 locations before 2026.

A. Securities and Exchange filing A report from the chain on Tuesday showed that about 50 stores will close this year and another 100 in 2025.

This represents roughly 10% of Denny’s total 1,586 stores. It has not yet been announced which locations will be closed.

“We believe this is absolutely the right thing to do to make our system stronger,” Denny’s CEO Kelli Valade told investors.

Valade said “underperforming” restaurants would be closed to meet the goal of increasing annual sales volume to $2.2 million.

A difficult economic environment

“This move should not be viewed as a negative reflection on Denny’s or the restaurant industry more broadly, but rather as a strategic adjustment to maintain financial health in a challenging economic environment,” Gregg Majewski, CEO and founder of Craveworthy Brands, told Business Insider. must be seen.”

He said there are changes happening in all kinds of dining spaces right now, and sometimes consolidation is necessary to help the overall brand.

The 71-year-old company on Tuesday reported a 0.1% decline in third-quarter same-store sales, and shares subsequently tumbled 18% that day.

This marks the fifth consecutive quarter of decline in annual sales.

Families were hit hard by inflation

Neil Saunders, managing director of GlobalData’s US retail and consumer division, told BI that although restaurant spending is forecast to grow by almost 5% in 2024, this is predominantly due to: Higher prices and inflation.

Related stories

“Overall, the family dining segment where Denny’s sits is under more pressure as families are hit hard by inflation and are therefore eating out less or cutting spending when they do eat out,” he said.

2024 so far A difficult year for the fast-food industry.

Starbucks, McDonald’s, KFC, In-N-Out and Olive Garden Some of the chains that raise prices in response to rising labor and commodity costs.

“Everybody lost traffic,” said Valade, Denny’s CEO.

The once-thriving family dining industry has been particularly hard hit. Over the summer, Red Lobster closed more than 100 restaurants across the USand Applebee’s has closed dozens of them.

Tomas Gorny, CEO of customer experience management company Nextiva, said, “Operational costs have skyrocketed with food prices increasing with inflation.”

It has also become harder to find workers, he explained, and customers have less discretionary money to eat out.

“They demand cheaper food and have higher expectations,” Gorny said.

Turning towards the takeaway

The rise in takeout has also impacted family dining as more customers order takeout instead of going out.

“The number of customers eating out has decreased, and this includes families,” Elijah Puzhakov, head of communications at Restaurantanji.com, told BI.

He said quick-service restaurants may appeal more to people looking for fast food.

“They are drawing customers away from traditional family dining venues,” Puzhakov said.