Denny's, Shoney's reshufflings seen as propelling segmentwide upgrades in operations, menus

Nation's Restaurant News, Feb 23, 1998 by Amy Zuber

On the heels of recent major structural shifts at both Denny's and Shoney's, the foodservice industry is waiting to sec how events unfold at the country's two largest family dining chains.

After a public proxy fight late last year led by Raymond Schoenbaum, J. Michael Bodnar is settling into his new position as president and chief executive of Shoney's. And Denny's parent company -- which emerged from a prepackaged Chapter 11 bankruptcy reorganization recently as Advantica Restaurant Group -- announced last month that a portion of the proceeds from the recent sale of its large Hardee's franchise will be used for acquisitions and the rejuvenation of its struggling family dining group.

Although Advantica said it has made no decisions yet on how the money will be allocated, restaurant analysts say the chain should be wary of rapid development.

"They must focus on operations," says Malcolm Knapp, president of Malcolm Knapp Inc., a New York restaurant consulting and research firm.

Craig Weichmann, a restaurant analyst with the Memphis, Tenn.-based firm of Morgan Keegan & Co., agrees. "The first thing they have to do is take care of existing units before they get too far along on adding new ones. It is not that adding is bad, but it is just priorities."

He adds: "Where a concept goes wrong -- and Shoney's and Denny's are very guilty of this -- is when they alter their reinvestment rate. That has put them [Shoney's and Denny's] where they are today."

If former debt burdens and financial setbacks caused the industry's two largest family chains to stint on concept enhancements, their segment's unrelenting competitive pressures are seen as forcing all its rival chains to focus more intently on brand building.

In a category that has been plagued by such descriptions as "old" and "tired," Denny's and Shoney's are not the only family chains charged with the task of making operational upgrades. Most concepts -- even ones like Cracker Barrel Old Country Store Inc. that continue to report strong earnings growth -- are striving to keep pace with the times.

In the competitive family dining category, some of the most recent strategies are aimed at improving operations, developing more innovative menus, driving dinner sales, attracting a larger number of children, upgrading facilities and promoting sales of retail merchandise.

Bob Evans Farms, for example, is rolling out updated uniforms with khaki slacks and a white shirt and new china with brighter colors.

Attention to detail is vital to the success of a chain, Weichmann says, citing Cracker Barrel's switch last year from a coffee cup and saucer to a coffee mug. "It is more substantial so it doesn't break as easily, and it holds more product so customers love the added value," he says.

Making breakfast more appetizing

Denny's said it is committed this year to developing new products and improving existing ones, especially during the breakfast daypart.

"What we are really focusing on is changing our fundamental position," says Jon Jameson, vice president of marketing and product development for the 1,700-unit chain. "Our positioning used to focus on being the low-price provider, and that is what we classified as value. But we quickly realized that although it was a successful strategy, it was not sustainable, long term."

Jameson adds that the goal for the brand is to be the "value leader." Building on the popularity of its signature skillet breakfasts, the chain recently rolled out two new offerings -- one featuring fajita chicken; the other, Canadian bacon.

Breakfast also remains a key component for IHOP Corp.'s International House of Pancakes chain.

"Our overall focus is to continue to promote breakfast," says Susan Hernandez, IHOP's vice president of marketing. "That is our strength, that is our identity and that is what our customers love about us."

IHOP has developed a new menu item based on the popularity of a signature product called Rooty Tooty Fresh 'N Fruity, which consists of two eggs, two strips of bacon, two sausages and two buttermilk pancakes. The new product, dubbed Rooty Tooty II, has those same items, but it includes hash browns and will be available at a special price during the week, according to Hernandez.

Targeting other dayparts

When it comes to new menu items, not all the family dining chains are banking on breakfast. Bob Evans Farms is preparing to roll out three new charbroiled dishes that will feature chicken, pork chops and ribs. The Columbus, Ohio-based chain will flavor the meats with a new proprietary menu item called Wildfire Barbecue Sauce.

In addition to the barbecued products, Bob Evans Farms will update its menu three times this year instead of two. "We will try to keep it more interesting," says Larry Corbin, executive vice president of the chain's restaurant division.

Friendly's is extending its line of stir-fry dinners with the introduction of an Asian-inspired dish that includes both chicken and shrimp as well as mixed vegetables, rice and an egg roll. The item, which is scheduled for a March rollout, will be promoted with a 79-cent sundae that is served with a fortune cookie.