Denny's Is Going Private After $620 Million Deal — Here's What It Could Mean For Customers

Denny's may not be the most elevated of breakfast chains, but I've always appreciated its sense of whimsy. I have fond memories of a "Hobbit"-themed menu it offered a dozen years ago, and the restaurant franchise has since featured other fun movie tie-ins, like a 2018 "Star Wars"-themed breakfast. More recently, however, it has faced some hardship. After closing over 100 underperforming locations, it was starting to look like Denny's might not be around too much longer. However, rather than calling it a day, the chain just brokered a $620 million deal, wherein it will be sold to private investors.

In case you haven't been keeping up with Denny's financials (I'm more interested in menu changes, myself), Denny's Corporation (DENN) was a publicly-traded stock, and one whose value has been on the decline. When word of the sale got out, stock prices jumped 50%, with investors hoping to get in on the buyout offer of $6.25 per share, which will be paid out once the sale goes through. The new owners will include Treville Capital, TriArtisan Capital Advisors, and Yadav Enterprises. The latter investor isn't new to the restaurant business, as it's a franchise company that already holds a significant stake in Denny's, as well as Corner Bakery Cafe, El Pollo Loco, Jack in the Box, Sizzler, and TGI Friday's. The sale may not have an immediate impact on Denny's customers, but in the long run, you may expect to see changes.

So will this new deal save Denny's? That remains to be seen. In the short term, it may mean the brand will stay alive, so you'll be able to enjoy Moons Over My Hammy for a while longer. (Remember when Denny's did that blue one for Halloween 2020? That was cute.) However, It's no guarantee of success in the long run. The private investors that purchased the restaurant chain will want to make the most of their investment, so if they see fit, they could implement some pretty drastic cost-cutting measures, like downsizing the menu or closing more restaurants.

One striking example of how private equity failed to benefit a restaurant chain is what happened to Red Lobster when it was sold to investors in 2014. One of the tactics that investors use to maximize their profits is something known as "asset stripping," in which investors sell off whatever they feel is worth anything and keep the profits rather than reinvesting them. That strategy typically doesn't benefit the business itself, and in the case of Red Lobster, the investors sold the land on which some 500 restaurants sat, and any locations that couldn't afford to lease it back again were forced to close. While Red Lobster has managed to stay in business, the chain has struggled since the sale. This seems to be par for the course with such deals, since businesses sold to private equity firms are 10 times more likely to declare bankruptcy within the next decade than ones that remain public.