Denny’s (Nasdaq: DENN) is on track to be a virtual restaurant leader as it rolls out two delivery-only concepts to almost its entire network of 1,700 restaurants across the country. CEO John Miller said in a recent earnings call and appearance at the ICR Conference that the brand was rolling out two concepts: The Burger Den and The Meltdown.
“The first of these is called The Burger Den,” said Miller. “This concept allows us to focus on one of our strengths, great burgers with new varieties using ingredients already in our pantry. Test results have been favorable and suggest the transactions from these tests are highly incremental. Over half of our domestic locations have signed up to participate in a three-phase rollout.”
The Meltdown focuses on a core menu item for the Denny’s brand: “handcrafted melts with fresh ingredients,” said Miller.
Food On Demand caught up with Dave Coltrin, Denny’s vice president of guest experience and marketing technology, who has deep experience in off-premises operations. The following is a Q&A with Coltrin.
What was the process of creating these brands?
We actually first developed the core concept of The Burger Den in 2019, but when COVID-19 hit, we moved quickly to adapt our strategy, reposition the launch and develop The Meltdown to launch simultaneously. Because we had identified the opportunity for virtual brands early, we were able to move quickly and finalize menus, brand identities and logistics with our third-party delivery partners. Both concepts began testing in mid-September 2020.
At Denny’s, our focus is innovating through a test-and-learn process without letting red tape get in the way. When we see an opportunity like the booming off-premise market, we act.
How did you focus on profitability for the individual locations?
For both concepts, we wanted to create brands that would excite customers and drive sales without posing any significant barriers for our franchisees. Streamlining the process at the restaurant level was a key consideration throughout the launch process.
The Meltdown menu is loaded with offerings that are brand new to Denny’s and our customers. We focused on innovation and quality, using artisan breads and a range of mouthwatering, premium ingredients to deliver crave-able, handcrafted melts that guests haven’t seen before.
Great burgers are a part of Denny’s heritage and The Burger Den plays to that strength.
Editor’s note: Miller noted that 70 percent of The Meltdown ingredients are already in the restaurant.
What do the operations look like in the actual restaurant?
Both brands are operated out of existing Denny’s kitchens, which means our franchisees can leverage the assets they already have in operation and our restaurant team members are working in spaces they’re familiar with, with processes they’ve already mastered. We developed a training course for restaurant teams and franchisees before the test period.
Throughout the test phase and phase one of the launch, operations have been smooth, which is a big reason we’ve seen such enthusiasm from our franchisee community.
Do you communicate that this is a Denny’s-owned brand?
We created new packaging for The Burger Den and The Meltdown, but we’re extremely transparent that Denny’s is behind the launch of both brands. It’s also important they stand on their own. Our virtual restaurants have their own brand identities and distinct menu offerings that are generating a lot of buzz among existing customers and bringing in new ones, as well.
Other brands got in some social media hot water by trying to hide the parent company. Any advice for brands creating their own virtual brands?
Be transparent. Denny’s is 96 percent franchised and many of our restaurants are small- and medium-sized businesses, but it’s still important to us that consumers understand our role in the launch. Our hope is that, by leveraging Denny’s existing assets, infrastructure and relationships, these brands will generate revenue increases for our franchisees in the Denny’s family while bringing in new customers and giving us new channels for product innovation.
How do you see the brands doing post COVID?
Convenience is king. It’s a shift we saw start to happen before the pandemic—which is why we made significant investments in our Denny’s on Demand platform—and this trend has rapidly accelerated over the past year.
The Burger Den and The Meltdown are not stopgaps until dine-in returns to full strength. They are long-term growth opportunities that give consumers the ability to try new items and flavor combinations from anywhere at any time.
What sort of research went into creating these concepts and menus?
Our research was extensive covering consumer behavior, including search, menu trends, innovative partnership options with the third-party delivery services, the competitive landscape and more. Every insight we uncovered pointed to more opportunity and gave us the confidence to launch the initial test phase.
And research doesn’t stop when the virtual restaurant launches. For instance, our partnership with DoorDash on The Meltdown is very much an interactive one, where we are working together to survey guests regarding their experience and identify ways to expand appeal and improve the menu offerings over time.
Is the core demographic different from a traditional Denny’s guest?
One of the primary demographics these brands will serve is the core third-party delivery consumer, which skews towards millennials and Gen Z, but our data shows that consumers of all ages are interested in our virtual brands.
The Burger Den has been a big hit in the dinner and late-night dayparts. The Meltdown is targeted at a cross-daypart audience that plays to our strength of delivering great food at any time of day or night. Both menus are strategically designed to resonate with these audiences.
What did it take to integrate all the technology and the platforms?
We had great relationships in place already through our Denny’s on Demand platform and were able to work quickly with our third-party delivery partners to launch our virtual brands. The Burger Den concept came out of strategic discussions with multiple partners discussing opportunities for building greater visibility for our delicious burgers and premium milkshakes.
For The Meltdown, we decided to pursue an exclusive partnership with DoorDash because we wanted to go after a slightly different customer, one looking for premium artisan ingredients in addition to great flavors. DoorDash’s willingness to be a true strategic partner with us on building and refining the concept for this consumer ultimately convinced us that an exclusive partner was the right move in this instance. We also leveraged Olo Rails to make the integrations seamless on the back end.
