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Denny's stock skyrockets as company plans to sell restaurants

CNBC logo CNBC 10/31/2018

Denny's investors are rallying behind the brand a day after the company said it will sell most of its remaining company-owned stores over the next 18 months as part of a cost-savings plan.

The company intends to sell between 90 and 125 restaurants in order to bring its total franchised locations to between 95 and 97 percent, Mark Wolfinger, chief financial officers for Denny's, told analysts on an earnings call Tuesday. About 89 percent of Denny's restaurants are currently owned by franchisees.

In addition, the company expects to earn about $30 million from selling up to 30 percent of 95 properties it owns. The proceeds will be reallocated towards purchasing higher-quality real estate, Wolfinger said.

Shares of the company surged more than 25 percent in midday trading Wednesday.

"Our refranchising and development strategy will enable us to further evolve as a franchisor of choice that provides more focused support services, all while yielding a higher quality, more asset-light business model," CEO John Miller said in a statement.

By having more franchised locations, Denny's will make more royalty revenue and save on costs associated with running individual restaurants. Franchisees won't be completely on their own, however. Many major brands like Dunkin to McDonald's often co-invest with franchisees when it comes to major investments like digital upgrades and remodels.

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