Within the past week, IHOP and Denny’s said their average restaurant sales last year climbed 3 percent over those of 2013, the biggest year-over-year jump in a decade. Emboldened Denny’s investors pushed the stock for “America’s Diner” to a 17-year high this week.
They have none of the newness, hype or prestige of fancy eateries or fast-casual chains. But at a time of low gas prices and an improving economy, analysts said, diners offer something far more attractive: cheap menus, ubiquitous restaurants and a direct line to the all-American appetite.
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‘EVERYDAY AMERICANS’
“Folks who go to family-dining restaurants, these are not people making a million dollars a year,” said Mark Kalinowski, a research analyst with Janney Montgomery Scott. “These are everyday Americans, and when they leave the gas station with $20 more in their pocket, a little bit of that finds its way into the cash registers of the family-dining chains.”
Mild winter weather, cheap gas and a better job market have helped persuade more hungry Americans to go out to eat. The chain-restaurant industry in the last quarter had the best same-store sales growth in six years, Black Box Intelligence data show. The conditions also have pushed Americans to take more road trips, where they’ll pass diners on nearly every highway exit.
At Cracker Barrel Old Country Store, which has more than 80 percent of its Southern-fried Americana eateries directly next to interstate offramps, sales at the average restaurant soared 8 percent in the past three months. The chain’s stock has climbed to its highest point since publicly debuting in 1981.
OPENINGS AND SPINOFFS
Decades-old diners have made it clear that they are not ready to go quietly into retirement. IHOP’s parent company, DineEquity, said Wednesday that franchisees nationwide will open, on average, a new diner every week this year. Waffle House is partnering with a sharing-economy app, Roadie, by turning its diners into pit stops for travelers who deliver packages along their drives.
Denny’s, a South Carolina-based chain famous for workaday fare such as the Grand Slam and Moons Over My Hammy, opened two dozen restaurants in the last three months of the year and even reopened some shuttered diners, including reopening a Denny’s around Thanksgiving near the Las Vegas Casino Royale.
The chain is busting into the fast-casual market pioneered by Chipotle with a millennial-targeted spinoff, called The Den, one of which opened last month near a college campus in San Diego. But it’s also going upscale. Denny’s recently opened its first diner in New York City, which is also its first to feature a full bar and a $300 Grand Cru Slam – a brunch for two that comes with a bottle of vintage Dom Perignon champagne.
Denny’s, which calls itself “the world’s largest full-service family-dining chain,” is also pushing heavily to expand worldwide, and it has 100 diners across Canada, Curaçao, Honduras, New Zealand and other countries. The food, however, is not just flapjacks: In Japan, Denny’s has offered rich plates of massaman curry, promoting it as “the most delicious food in the world.”
UNEXPECTED TERRITORY
That push has taken the humble home-style brand into unexpected territory. The chain plans to open 30 diners across the Middle East over the next decade. This year, a franchisee plans to open the first Denny’s in the United Arab Emirates.
As with most diners, the chain has won lots of business and customer loyalty simply by keeping its food cheap.
But with improvements in the economy and consumer confidence, the chain is now also profiting off of subtly raised prices, and guests who are opting to splurge on dishes that are pricier but still cheap, like steaks and salmon.
The roadside-diner business will always remain vulnerable to climbing gas prices, bad weather and volatile food costs. And some of those changes could happen quicker than others: Gas prices have climbed every day for the past month, AAA data show.
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