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What changed in DENNY'S Corp's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of DENNY'S Corp's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+213 added−212 removedSource: 10-K (2025-02-24) vs 10-K (2024-02-26)

Top changes in DENNY'S Corp's 2024 10-K

213 paragraphs added · 212 removed · 182 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

50 edited+10 added−9 removed48 unchanged
Biggest changeWe value and are proud of our community engagement including our investment in causes that are important to our people and communities, such as our education initiatives through our Denny’s Hungry for Education TM Scholarship program, helping fight childhood hunger, and supporting diverse and disadvantaged businesses.
Biggest changeWe value and are proud of our community engagement including our investment in causes that are important to our employees, franchisees and communities, such as: • our education initiatives through our Denny’s Hungry for Education® Scholarship program, 5 • helping fight childhood hunger through No Kid Hungry, • our commitment to developing more diverse franchisees, • increasing our spend with diverse businesses, and • serving hope to those in need through our Denny’s Mobile Relief Diner Business Resource Groups and Inclusion Council Our Business Resource Groups and Inclusion Council, made up of members from all levels of the organization, collaborate on initiatives designed to renew our workplace and create business results that will strengthen the reputation of our brands and increase guest satisfaction and market share.
We will post on our website any amendments to, or waivers from, a provision of the Denny’s Code of Conduct that applies to the Chief Executive Officer, Chief Financial Officer, Chief Accounting Officer and Corporate Controller or persons performing similar functions, and that relates to (i) honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships; (ii) full, fair, accurate, timely, and understandable disclosure in reports and documents that we file with, or submit to, the SEC and in other public communications made by us; (iii) compliance with applicable governmental laws, rules and regulations; (iv) the prompt internal reporting of violations of Denny’s Code of Conduct to an appropriate person or persons identified in the code; or (v) accountability to adherence to the code.
We will post on our website any amendments to, or waivers from, a provision of the Denny’s Code of Conduct that applies to the Chief Executive Officer, Chief Financial Officer, Chief Accounting Officer and Corporate Controller or persons performing similar functions, and that relates to (i) honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships; (ii) full, fair, accurate, timely, and understandable disclosure in reports and documents that we file with, or submit to, the SEC and in other public communications made by us; (iii) compliance with applicable governmental laws, rules and regulations; (iv) the prompt internal reporting of violations of Denny’s Code of Conduct to an appropriate person or persons identified in the code; or (v) accountability to adherence to the code. 9
Further, we monitor franchisees’ compliance with PCI standards. We have augmented our technology infrastructure, primarily within digital and in-restaurant systems, to support the changing dynamics of our industry and guest expectations. These enhancements were introduced through our standard change control mechanisms and followed prescribed standards for testing and introduction into our environment.
Further, we monitor franchisees’ compliance with PCI standards. We have augmented our technology infrastructure, primarily within digital and in-restaurant systems, to support the changing dynamics of our industry and guest expectations. These enhancements were introduced through our standard change control 6 mechanisms and followed prescribed standards for testing and introduction into our environment.
Economic, Market and Other Conditions The restaurant industry is affected by many factors, including changes in national, regional and local economic conditions affecting consumer spending; the political environment (including acts of war and terrorism); changes in customer travel patterns including changes in the price of gasoline; changes in socio-demographic characteristics of areas where restaurants are located; changes in consumer tastes and preferences; food safety and health concerns; outbreaks of flu or other viruses (such as COVID-19) or other diseases; increases in the number of restaurants; and unfavorable trends affecting restaurant operations, 7 such as rising wage rates, health care costs, utility expenses and unfavorable weather.
Economic, Market and Other Conditions The restaurant industry is affected by many factors, including changes in national, regional and local economic conditions affecting consumer spending; the political environment (including acts of war and terrorism); changes in customer travel patterns including changes in the price of gasoline; changes in socio-demographic characteristics of areas where restaurants are located; changes in consumer tastes and preferences; food safety and health concerns; outbreaks of flu or other viruses (such as COVID-19 and avian flu) or other diseases; increases in the number of restaurants; and unfavorable trends affecting restaurant operations, such as rising wage rates, health care costs, utility expenses and unfavorable weather.
Dunn has been Executive Vice President and Chief Global Development Officer since April 2021. He previously served as Senior Vice President and Chief Global Development Officer from July 2015 to April 2021, as Senior Vice President, Global Development from April 2011 to July 2015 and as Vice President, Company and Franchise Development from September 2005 to April 2011. 8 Mr.
Mr. Dunn has been Executive Vice President and Chief Global Development Officer since April 2021. He previously served as Senior Vice President and Chief Global Development Officer from July 2015 to April 2021, as Senior Vice President, Global Development from April 2011 to July 2015 and as Vice President, Company and Franchise Development from September 2005 to April 2011. Mr.
Denny’s has been serving guests for nearly 70 years and is best known for its all day breakfast fare. The Grand Slam, one of our most popular menu items, was first introduced in 1977. Denny’s offers a wide selection of lunch and dinner items including entrees, burgers, sandwiches and salads, along with an assortment of appetizers and desserts.
Denny’s has been serving guests for over 70 years and is best known for its all day breakfast fare. The Grand Slam, one of our most popular menu items, was first introduced in 1977. Denny’s offers a wide selection of lunch and dinner items including entrees, burgers, sandwiches and salads, along with an assortment of appetizers and desserts.
As a leading full-service family dining brand, we’ve developed a craveable, indulgent menu that forges brand loyalty, attracts new guests to Denny’s and establishes the framework for our primary marketing strategies. Menu Offerings As “America’s Diner,” Denny’s has created a menu featuring a large selection of craveable items served in a friendly and welcoming atmosphere for all guests.
As a leading full-service family dining brand, we’ve developed a craveable, indulgent menu that forges brand loyalty, attracts new generations of fans to Denny’s and establishes the framework for our primary marketing strategies. Menu Offerings As “America’s Diner,” Denny’s has created a menu featuring a large selection of craveable items served in a friendly and welcoming atmosphere for all guests.
Government Regulations We and our franchisees are subject to federal, state, local and international laws and regulations governing various aspects of the restaurant business, such as compliance with various minimum wage, overtime, health care, sanitation, food safety, citizenship, and fair labor standards, as well as laws and regulations relating to safety, fire, zoning, building, consumer protection and taxation.
Government Regulations We and our franchisees are subject to federal, state, local and international laws and regulations governing various aspects of the restaurant business, such as compliance with various minimum wage, overtime, health care, sanitation, food safety, citizenship, and fair labor standards, as well as laws and regulations relating to safety, fire, zoning, building, consumer 7 protection, tariffs and taxation.
Product Development and Marketing The Denny’s name has been associated with high-quality, reasonably priced entrees, appetizers, desserts, and beverages which have appealed to guests across all generations for nearly 70 years.
Product Development and Marketing The Denny’s name has been associated with high-quality, reasonably priced entrees, appetizers, desserts, and beverages which have appealed to guests across all generations for over 70 years.
License agreements for nontraditional locations, such as university campuses, may contain higher royalty and lower advertising contribution rates than the traditional franchise agreements. Our domestic contractual royalty rate averaged approximately 4.36% during 2023. We work closely with our franchisees to plan and execute many aspects of the business.
License agreements for nontraditional domestic locations, such as university campuses, may contain higher royalty and lower advertising contribution rates than the traditional franchise agreements. Our Denny’s domestic contractual royalty rate averaged approximately 4.36% during 2024. We work closely with our franchisees to plan and execute many aspects of the business.
We offer a variety of options for breakfast, lunch, dinner and late-night including classic entrees, salads, appetizers, desserts and beverages. Most Denny’s restaurants also offer kid’s menus and senior specials.
We offer a variety of options for breakfast, lunch, dinner and late-night including classic entrees, handhelds, appetizers, desserts and beverages. Most Denny’s restaurants also offer kid’s menus and senior specials.
Financial information about our operations, including our revenues and net income for the fiscal years ended December 27, 2023, December 28, 2022, and December 29, 2021, and our total assets as of December 27, 2023 and December 28, 2022, is included in our Consolidated Financial Statements. 1 Franchising and Development Franchising Our criteria to become a Denny’s franchisee include minimum liquidity and net worth requirements and appropriate operational experience.
Financial information about our operations, including our revenues and net income for the fiscal years ended December 25, 2024, December 27, 2023, and December 28, 2022, and our total assets as of December 25, 2024 and December 27, 2023, is included in our consolidated financial statements. 1 Franchising and Development Franchising Our criteria to become a Denny’s franchisee include minimum liquidity and net worth requirements and appropriate operational experience.
Our Denny’s menu can be conveniently enjoyed by guests either in our restaurants, via takeout, curb-side or delivery through our Denny’s on Demand platform and third-party delivery providers. Denny’s on Demand is our online ordering platform enabling our guests to order whatever they want, whenever they want.
Our Denny’s menu can be conveniently enjoyed by guests either in our restaurants, via takeout, curb-side or delivery through our Denny’s on Demand platform and third-party delivery providers. Denny’s online ordering platform enables our guests to order whatever they want, whenever they want.
Through our marketing team, Denny’s anticipates consumer and market trends and fully leverages consumer insights to determine strategies for brand communication and demand generation. We participate in comprehensive, integrated marketing activities, including print, broadcast, radio, digital and social advertising; multicultural marketing; public relations and brand reputation; customer relationship management; field marketing; and national and local promotions.
The Denny’s Marketing Team anticipates consumer and market trends to fully leverage consumer insights to determine strategies for brand communication and demand generation. We participate in comprehensive, integrated marketing activities, including broadcast, radio, digital and social advertising; multicultural marketing; public relations and brand reputation; customer relationship management; field marketing; and national and local promotions.
We have four dayparts, breakfast, lunch, dinner and late night, accounting for 27%, 36%, 21% and 16%, respectively, of average daily sales. Weekends have traditionally been the most popular time for guests to visit our restaurants. In 2023, 38% of an average week of sales occurred from Friday late night through Sunday lunch.
We have four dayparts, breakfast, lunch, dinner and late night, accounting for 28%, 36%, 20% and 16%, respectively, of average daily sales. Weekends have traditionally been the most popular time for guests to visit our restaurants. In 2024, 38% of an average week of sales occurred from Friday late night through Sunday lunch.
International Development In addition to the development agreements signed for domestic restaurants, as of December 27, 2023, we had potential to develop approximately 128 international franchised Denny’s restaurants with our current development partners in various locations including Canada, Central America, Indonesia, Mexico, the Middle East, the Philippines and the United Kingdom.
International Development In addition to the development agreements signed for domestic restaurants, as of December 25, 2024, we had potential to develop approximately 116 international franchised Denny’s restaurants with our current development partners in various locations including Canada, Central America, Indonesia, Mexico, the Middle East, the Philippines and the United Kingdom.
She joined the Company first serving as Chief Executive Officer and President from June 2022 to September 2022 and became a member of our Board of Directors in July 2022.
Valade has been Chief Executive Officer since September 2022. She joined the Company first serving as Chief Executive Officer and President from June 2022 to September 2022 and became a member of our Board of Directors in July 2022.
The new Denny’s mobile app, available for IOS and Android, provides a personalized online ordering experience. Guests can also order from Dennys.com. Both the mobile app and website make it easy for guests to order their favorite Denny’s items for 3 takeout or delivery.
Guests can also order from Dennys.com or the Denny’s mobile app, which provides a personalized online ordering experience. Both the mobile app 3 and website make it easy for guests to order their favorite Denny’s items for takeout or delivery.
Additionally, our franchisees are currently contributing up to 3.25% of gross sales for marketing and may make additional advertising contributions as part of a local marketing co-operative. Approximately 81% of our Denny’s franchised restaurants were operating under this traditional agreement as of December 27, 2023.
Additionally, our franchisees are currently contributing up to 3.25% of gross sales for marketing and may make additional advertising contributions as part of a local marketing co-operative. Approximately 90% of our Denny’s domestic franchised restaurants were operating under this traditional agreement as of December 25, 2024.
Diversity, Equity & Inclusion Our investment in people includes creating a culture of belonging that attracts, retains and fosters the growth of the best people and creates high performance in our restaurants.
Inclusion & Community Engagement Our investment in people includes creating a culture of belonging that attracts, retains and fosters the growth of the best people and creates high performance in our restaurants.
As of December 27, 2023, we had approximately 3,500 employees of whom approximately 3,100 were employees of our company-owned restaurants and approximately 400 were corporate employees at our restaurant support centers or in the field. Our commitments and progress towards executing this strategy in support of employee experience and performance are reflected below.
As of December 25, 2024, we had approximately 3,800 employees of whom approximately 3,400 were employees of our company-owned restaurants and approximately 400 were corporate employees at our restaurant support centers or in the field. Our commitments and progress towards executing this strategy in support of employee experience and performance are reflected below.
We are continuously focused on enhancing our cybersecurity capabilities. We are required to maintain the highest level of Payment Card Industry (“PCI”) Data Security Standard (“DSS”) compliance. We are also required to protect critical and sensitive data for our employees, customers, and the Company.
We are required to maintain the highest level of Payment Card Industry (“PCI”) Data Security Standard (“DSS”) compliance. We are also required to protect critical and sensitive data for our employees, customers, and the Company.
Before introducing a new menu item to market, we rigorously test it against consumer expectations. We ensure that our culinary standards, food science and technology efficiencies, nutritional analysis, financials and operational execution all meet the business requirements.
Before introducing a new menu item to market, we test the idea with consumers. We ensure that our culinary standards, food science and technology efficiencies, nutritional analysis, financials and operational execution all meet the business requirements.
These commitments were attached to the sale of 113 company restaurants during 2018 and 2019. At December 27, 2023, we had approximately 78 domestic development commitments.
These commitments were attached to the sale of 113 company restaurants during 2018 and 2019. At December 25, 2024, we had approximately 64 domestic development commitments.
See “Risk Factors” for a discussion of risks related to governmental regulation of our business. Information about our Executive Officers The following table sets forth information with respect to each executive officer as of the filing date of this report: Name Age Positions Stephen C. Dunn 59 Executive Vice President and Chief Global Development Officer Jay C.
See “Risk Factors” for a discussion of risks related to governmental regulation of our business. Information about our Executive Officers The following table sets forth information with respect to each executive officer as of the filing date of this report: Name Age Positions Christopher D. Bode 62 President and Chief Operating Officer, Denny’s, Inc. Stephen C.
Additionally, off-premises sales, including sales for delivery and through our two virtual brands, represented approximately 20% of total sales in 2023. As of December 27, 2023, the Denny’s brand consisted of 1,573 franchised, licensed and company restaurants around the world, including 1,407 restaurants in the United States and 166 international restaurant locations.
Additionally, off-premises sales, including sales for delivery and through our three virtual brands, represented approximately 20% of total sales in 2024. As of December 25, 2024, the Denny’s brand consisted of 1,499 franchised, licensed and company restaurants around the world, including 1,334 restaurants in the United States and 165 international restaurant locations.
As of December 27, 2023, 1,508 of Denny’s restaurants were franchised or licensed, representing 96% of the total Denny’s restaurants, and 65 were company restaurants. The Keke’s Brand We acquired Keke's on July 20, 2022.
As of December 25, 2024, 1,438 of Denny’s restaurants were franchised or licensed, representing 96% of the total Denny’s restaurants, and 61 were company restaurants. The Keke’s Brand We acquired Keke's on July 20, 2022.
The majority of these restaurants are expected to open over the next ten years. During 2023, we opened 11 international franchised locations, including five in the Philippines, four in Canada, one each in El Salvador and Puerto Rico.
The majority of these restaurants are expected to open over the next ten years. During 2024, we opened three international franchised locations, including one each in Canada, Honduras, and the Philippines.
Gilmore has been Senior Vice President, Chief Accounting Officer and Corporate Controller since February 2021. He previously served as Vice President, Chief Accounting Officer and Corporate Controller from May 2007 to February 2021. Ms. Sharps Myers has been Executive Vice President, Chief Legal & Administrative Officer and Corporate Secretary since February 2024.
Gilmore has been Senior Vice President, Chief Accounting Officer and Corporate Controller since February 2021. He previously served as Vice President, Chief Accounting Officer and Corporate Controller from May 2007 to February 2021. 8 Mr. Le has been Senior Vice President and Chief Technology Officer since September 2024.
We also have and are continuing to develop systems that consolidate and report on data from our franchised and company restaurants, including transaction-level detail. These systems are collectively supported by an enterprise network that facilitates seamless connectivity for applications and data throughout our business infrastructure. Our information technology systems have been designed to protect against unauthorized access and data loss.
These systems are collectively supported by an enterprise network that facilitates seamless connectivity for applications and data throughout our business infrastructure. Our information technology systems have been designed to protect against unauthorized access and data loss. We are continuously focused on enhancing our cybersecurity capabilities.
Our development teams work closely with franchisees and real estate brokers to identify sites that meet specific standards. Sites are evaluated based on a variety of factors, including but not limited to: • demographics; • traffic patterns; • visibility; • building constraints; • competition; • environmental restrictions; and • proximity to high-traffic consumer activities.
Sites are evaluated based on a variety of factors, including but not limited to: • demographics; • traffic patterns; • visibility; • building constraints; • competition; • environmental restrictions; and • proximity to high-traffic consumer activities.
We are subject to a variety of federal, state, and international laws governing franchise sales and the franchise relationship, as well as judicial and administrative interpretations of such laws.
We are subject to a variety of federal, state, and international laws governing franchise sales and the franchise relationship, as well as judicial and administrative interpretations of such laws. The operation of our franchise system is also subject to regulations enacted by a number of states and rules promulgated by the Federal Trade Commission.
As of December 27, 2023, the Company consisted of 1,631 restaurants, 1,558 of which were franchised/licensed restaurants and 73 of which were company operated.
As of December 25, 2024, the Company consisted of 1,568 restaurants, 1,493 of which were franchised/licensed restaurants and 75 of which were company operated.
Generally, with appropriate renewal and use, the registration of our service marks and trademarks will continue indefinitely. Competition The restaurant industry is highly competitive.
When unauthorized use or infringement of our trademarks, service marks, or related assets is suspected, we will take appropriate action, including legal measures, when necessary, to enforce our rights. Generally, with appropriate renewal and use, the registration of our service marks and trademarks will continue indefinitely. Competition The restaurant industry is highly competitive.
Additional information about our segments can be found in Note 21, “Segment Information” to our Consolidated Financial Statements in Part II, Item 8 of this report. References to the “Company,” “we,” “us,” and “our” in this Form 10-K are references to Denny’s Corporation and its subsidiaries. Reference to “Denny’s” or “Keke’s” are references to the specific brand.
References to the “Company,” “we,” “us,” and “our” in this Form 10-K are references to Denny’s Corporation and its subsidiaries. Reference to “Denny’s” or “Keke’s” are references to the specific brand.
Diversity by the Numbers Diverse team members make up approximately: • 75% of our total workforce and 80% of restaurant management • 63% of our domestic restaurants are owned by diverse franchisees • 21% of our domestic restaurants are owned by women who are actively engaged in the business • Our Board of Directors consists of eight directors – 63% are from a diverse background and 63% are women • 6% of our domestic restaurants are owned by individuals who identify as members of the LGBTQ+ community We believe in accountability that starts with our leadership and extends to all of our team members.
Diverse team members make up approximately: • 75% of our total workforce and 77% of restaurant management • 64% of our domestic restaurants are owned by diverse franchisees • 9% of our domestic restaurants are owned by women • Our Board of Directors consists of nine directors – 56% are from a diverse background and 56% are women • 5% of our domestic restaurants are owned by individuals who identify as members of the LGBTQ+ community Information Technology The mission of our Information Technology department is to align our technology strategy in support of our business strategies.
Marketing and Advertising We deploy national, local and co-operative marketing strategies to promote and amplify Denny’s brand strengths as “America’s Diner.” Through integrated marketing strategies, we promote our various breakfast, lunch, dinner, and late-night menu offerings and premium limited-time-only offerings as well as the convenience of online ordering and payment for takeout or delivery.
Marketing and Advertising We deploy national, local and co-operative marketing strategies to promote and amplify Denny’s brand strengths as “America’s Diner.” Through integrated marketing strategies, we promote our various premium breakfast, lunch, and dinner entrees alongside our value platform and limited time offer promotions. We also support messaging our off-premises business.
The table below sets forth information regarding the distribution of single-store and multi-store franchisees as of December 27, 2023: Number of Denny’s Restaurants Owned Franchisees Percentage of Franchisees Restaurants Percentage of Restaurants One 79 38.0 % 79 5.2 % Two to five 68 32.7 % 215 14.3 % Six to ten 29 14.0 % 227 15.0 % Eleven to twenty 16 7.7 % 224 14.9 % Twenty-one to thirty-five 8 3.8 % 230 15.3 % Thirty-six and over 8 3.8 % 533 35.3 % Total 208 100.0 % 1,508 100.0 % Keke’s Development We anticipate the first few Keke’s restaurant openings outside of Florida will likely be company operated restaurants to prove the appeal of the brand in new markets.
The table below sets forth information regarding the distribution of single-store and multi-store franchisees as of December 25, 2024: Number of Denny’s Restaurants Owned Franchisees Percentage of Franchisees Restaurants Percentage of Restaurants One 78 38.4 % 78 5.4 % Two to five 65 32.0 % 206 14.3 % Six to ten 28 13.8 % 218 15.2 % Eleven to twenty 17 8.4 % 238 16.6 % Twenty-one to thirty-five 6 3.0 % 170 11.8 % Thirty-six and over 9 4.4 % 528 36.7 % Total 203 100.0 % 1,438 100.0 % Keke’s Development In 2024, Keke's cafe openings were a combination of company operated cafes and franchised cafes.
Approximately 48% of Keke’s total weekly sales occur on the weekends, and off-premises sales, including sales for delivery, represented approximately 14% of total sales in 2023. As of December 27, 2023, the Keke’s brand consisted of 58 franchised and company restaurants in Florida, of which 50, representing 86% of total Keke’s restaurants, were franchised and eight were company restaurants.
Approximately 48% of Keke’s total weekly sales occur on the weekends, and off-premises sales, including sales for delivery, represented approximately 16% of total sales in 2024.
We also deliver solutions that support financial and regulatory needs in addition to necessary business improvements. We rely on information technology systems in all aspects of our operations. At the restaurant level, systems include point-of-sale platforms along with systems and tools for kitchen operations, labor scheduling, inventory management, cash management and credit card transaction processing.
At the restaurant level, systems include point-of-sale platforms along with systems and tools for kitchen operations, labor scheduling, inventory management, cash management and credit card transaction processing. Our technology platform includes industry-standard market solutions as well as proprietary software and integration, yielding tools and information managers need to run efficient and effective restaurants.
At the corporate level, we have a robust Enterprise Resource Planning (“ERP”) platform that supports finance, accounting, human resources and payroll functions. Our ERP is a cloud-based market solution, enabling us to take advantage of continual software improvements aligned with industry best practices.
Our ERP is a cloud-based market solution, enabling us to take advantage of continual software improvements aligned with industry best practices. We also have and are continuing to develop systems that consolidate and report on data from our franchised and company restaurants, including transaction-level detail.
Segment Information We manage our business by brand and as a result have identified two operating segments, Denny’s and Keke’s. In addition, we have identified Denny’s as a reportable segment. Keke’s is presented as a component of Other in our segment disclosures.
As of December 25, 2024, the Keke’s brand consisted of 69 franchised and company restaurants in the United States, of which 55, representing 80% of total Keke’s restaurants, were franchised and 14 were company restaurants. Segment Information We manage our business by brand and as a result have identified two operating segments, Denny’s and Keke’s.
In addition, we have registered various domain names on the internet that incorporate certain of our trademarks and service marks. We believe these domain name registrations are an integral part of our identity. From time to time, we may resort to legal measures to defend and protect the use of our intellectual property.
Additionally, we have registered various domain names on the internet incorporating certain trademarks and service marks, which we consider integral to our brand identity. We are committed to protecting the value and integrity of our intellectual property.
Our technology platform includes industry-standard market solutions as well as proprietary software and integration, yielding tools and information managers need to run efficient and effective restaurants. We invest in new technologies and R&D efforts to improve operations and enhance the guest experience through innovative solutions like online ordering and payment for pick-up and delivery.
We invest in new technologies and R&D efforts to improve operations and enhance the guest experience through innovative solutions like online ordering and payment for pick-up and delivery. At the corporate level, we have a robust Enterprise Resource Planning (“ERP”) platform that supports finance, accounting, human resources and payroll functions.
Similar to Denny’s, we expect the majority of our future Keke’s restaurant openings and growth of the brand to come primarily from the development of franchised restaurants. As of December 27, 2023, we had 14 development agreements for 94 Keke’s franchised restaurants. Site Selection The success of any restaurant is significantly influenced by its location.
As of December 25, 2024, we had 23 development agreements for 141 Keke’s franchised cafes. Site Selection The success of any restaurant is significantly influenced by its location. Our development teams work closely with franchisees and real estate brokers to identify sites that meet specific standards.
There were no material changes introduced into the core of our technology operating systems, and all PCI—DSS compliance standards were followed. 6 In addition to technology changes in direct response to changing business and guest expectations, we have benefited from our prior focus and investments in various technology platforms over the past few years.
There were no material changes introduced into the core of our technology operating systems, and all PCI—DSS compliance standards were followed. In addition, we continue to invest in technologies that protect consumer data and are compliant with the California Consumer Privacy Act, California Privacy Rights Act, and similar data privacy regulations.
Gilmore 54 Senior Vice President, Chief Accounting Officer and Corporate Controller Gail Sharps Myers 54 Executive Vice President, Chief Legal & Administrative Officer and Corporate Secretary Pankaj K. Patra 47 Executive Vice President, Chief Digital and Technology Officer Kelli F. Valade 54 Chief Executive Officer Robert P. Verostek 52 Executive Vice President and Chief Financial Officer Mr.
Dunn 60 Executive Vice President and Chief Global Development Officer Jay C. Gilmore 55 Senior Vice President, Chief Accounting Officer and Corporate Controller Minh Le 51 Senior Vice President and Chief Technology Officer Gail Sharps Myers 55 Executive Vice President, Chief Legal & Administrative Officer and Corporate Secretary Monigo G.
We have a world class DEI philosophy embraced by our workforce and we commit to support other companies in doing the same. Information Technology The mission of our Information Technology department is to align our technology strategy in support of our business strategies. We focus on leveraging technology to drive efficiencies, simplify and standardize operations, and streamline the guest experience.
We focus on leveraging technology to drive efficiencies, simplify and standardize operations, and streamline the guest experience. We also deliver solutions that support financial and regulatory needs in addition to necessary business improvements. We rely on information technology systems in all aspects of our operations.
(capping off a 10-year career there). Mr. Patra has been Executive Vice President, Chief Digital and Technology Officer since October 2023. Prior to joining the Company, he served as Senior Vice President and Chief Information Officer at Brinker International, Inc. (where he worked for about 15 years). Ms. Valade has been Chief Executive Officer since September 2022.
(capping off a 10-year career there). Ms. Saygbay-Hallie has been Executive Vice President and Chief People Officer since August 2024. She previously served as Senior Vice President, Chief People Officer of Checkers & Rally's Drive-In Restaurants from January 2022 to August 2024 and as Vice President, Human Resources of XPO Logistics, Inc. from July 2019 to October 2021. Mr.
Additional components of our strategic areas of focus include: Business Resource Leadership Groups We have established seven business resource leadership groups for our employees to provide encouragement and an enhanced sense of belonging through informal mentoring, participation in professional and community events and access to personal and professional development and growth opportunities.
They serve as ambassadors, bridge builders, data collectors, educators, accountability partners and champions of inclusion and community engagement within our brands. Additionally, they help foster a more inclusive work environment, improve communication and provide encouragement and an enhanced sense of belonging through informal mentoring, participation in professional and community events, and access to personal and professional development and growth opportunities.
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Additionally, they help foster a more inclusive work environment, improve 5 communication and trust among employees and enhance understanding of all employees about the value of diversity.
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In addition, we have identified Denny’s as a reportable segment. Keke’s is presented as a component of Other in our segment disclosures. Additional information about our segments can be found in Note 20, “Segment Information” to our consolidated financial statements in Part II, Item 8 of this report.
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The eight business resource groups include the African American Leadership Group, Asian American, Native Hawaiian, Pacific Islander Leadership Group, Emerging Leaders Group, Hispanic Leadership Group, LGBTQ+ Leadership Group, Veterans Leadership Group, Wellbeing Group, and Women’s Leadership Group.
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We anticipate we will continue opening company operated cafes to accelerate the expansion of the brand into new markets with the intent of refranchising company operated cafes to franchisees over time. We anticipate the growth of the Keke’s brand to come primarily from the development of franchised cafes.
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Diversity Council Our Diversity, Equity and Inclusion (“DEI”) Council collaborates on initiatives designed to renew our workplace and create business results that will increase and strengthen the reputations of our brands, guest satisfaction and market share.
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Our Corporate Commitment We have developed industry-leading initiatives that spotlight differences in all areas in order to build a culture that values, understands, and embraces team members from all walks of life while ensuring alignment with our corporate strategy and core values.
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The council consists of 23 cross-functional members representing various positions throughout our organization, who serve as ambassadors, bridge builders, data collectors, educators, accountability partners and champions of DEI within our brands.
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It is our mission to use Denny’s culture – wildly diverse, demonstrably inclusive, and unquestionably fair and equal in opportunity for all – to grow shareholder value. As America’s Diner, we aim to be a place that employs all, buys from all, promotes all, serves all, and supports all as a natural extension of who we are.
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These investments include our ERP platform and enterprise communication and collaboration tools, which prepared us to make a quick transition from a centralized to a remote workforce during the COVID-19 pandemic with no significant additional risk or negative impact to business processing and continuity.
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Diversity by the Numbers We believe in accountability that starts with our leadership and extends to all of our team members.
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These same investments that allowed us to transition to a remote workforce continue to support a hybrid wok environment under which many of our employees split time between working centrally and remotely. In 2022, upon the acquisition of Keke’s, we integrated Keke’s systems and data into the enterprise systems currently employed.
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Saygbay-Hallie 51 Executive Vice President and Chief People Officer David P. Schmidt 54 President, Keke’s, Inc. Kelli F. Valade 55 Chief Executive Officer Robert P. Verostek 53 Executive Vice President and Chief Financial Officer Mr. Bode has been President and Chief Operating Officer of Denny’s, Inc. since September 2024.
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All Keke’s business leaders and employees outside the physical restaurant were provided with workstations that meet our existing standards for security and performance. Work is underway with Keke’s leadership to prioritize additional technology investments within the restaurants to support the needs of the brand, while also continuing the focus on security, scalability, and standardization.
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He previously served as President of Hardees USA from November 2023 to September 2024, as Chief Operating Officer of Hardees USA from September 2022 to November 2023, as Executive Vice President, Chief Operating Officer of Denny’s Corporation from February 2021 to August 2022 and as Senior Vice President and Chief Operating Officer of Denny’s Corporation from October 2014 to February 2021.
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Following the World Health Organization’s declaration of the COVID-19 pandemic on March 11, 2020, federal, state and local governments responded by implementing restrictions on travel, “stay at home” directives, “social distancing” guidance, limitations of dine-in food service, and mandated dining room closures which collectively had a significant adverse impact on the Company’s business performance, results of operations and cash flows for the year ended December 29, 2021.
Added
He previously served as Chief Information Officer of Checkers & Rally's Drive-In Restaurants from July 2019 to September 2024 and as Senior Vice President, IT of Corner Bakery Cafe from December 2015 to July 2019. Ms. Sharps Myers has been Executive Vice President, Chief Legal & Administrative Officer and Corporate Secretary since February 2024.
Removed
The operation of our franchise system is also subject to regulations enacted by a number of states and rules promulgated by the Federal Trade Commission.
Added
Schmidt has been President of Keke’s, Inc. since September 2022.
Added
He previously served as Executive Vice President and Chief Financial Officer of Red Lobster from March 2022 to September 2022, as Vice President and Chief Financial Officer of Casual Dining at Bloomin’ Brands, Inc. from March 2019 to March 2022 and as President, Bonefish Grill from April 2016 to March 2019. Ms.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeFood service businesses and the performance of company and franchised restaurants may be materially and adversely affected by factors such as: • consumer preferences, including nutritional and dietary concerns; • consumer spending habits; • global, national, regional and local economic conditions; • demographic trends; • traffic patterns; • the type, number and location of competing restaurants; and • the ability to renew leased properties on commercially acceptable terms, if at all. 10 Dependence on frequent deliveries of fresh produce and other food products subjects food service businesses to the risk that shortages or interruptions in supply caused by adverse weather, food safety warnings, animal disease outbreak or other conditions beyond our control could adversely affect the availability, quality and cost of ingredients.
Biggest changeFood service businesses and the performance of company and franchised restaurants may be materially and adversely affected by factors such as: • consumer preferences, including nutritional and dietary concerns; • consumer spending habits; • global, national, regional and local economic conditions; • demographic trends; • traffic patterns; • the type, number and location of competing restaurants; and • the ability to renew leased properties on commercially acceptable terms, if at all.
The development of new restaurants may be adversely affected by risks such as: 12 • inability to identify suitable franchisees; • costs and availability of capital for the Company and/or franchisees; • competition for restaurant sites; • negotiation of favorable purchase or lease terms for restaurant sites; • inability to obtain all required governmental approvals and permits; • delays in completion of construction; • cost of materials; • challenge of identifying, recruiting and training qualified restaurant managers; • restaurants not achieving the expected revenue or cash flow once opened; • expansion of the Keke’s brand outside of the state of Florida due to lower customer awareness in a highly competitive category; • challenges specific to the growth of international operations that are different from domestic development; and • general economic conditions.
The development of new restaurants may be adversely affected by risks such as: • inability to identify suitable franchisees; • costs and availability of capital for the Company and/or franchisees; • competition for restaurant sites; • negotiation of favorable purchase or lease terms for restaurant sites; • inability to obtain all required governmental approvals and permits; • delays in completion of construction; • cost of materials; • challenge of identifying, recruiting and training qualified restaurant managers; • restaurants not achieving the expected revenue or cash flow once opened; • expansion of the Keke’s brand outside of the state of Florida due to lower customer awareness in a highly competitive category; • challenges specific to the growth of international operations that are different from domestic development; and • general economic conditions.
Our amended and restated by-laws provide that consistent with the applicable provisions of the Delaware General Corporation Law (the “DGCL”), unless our Board of Directors, acting on behalf of the Company, consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware shall be the sole and exclusive forum for any and all internal corporate claims, including but not limited to: 13 • any derivative action or proceeding brought on our behalf; • any action asserting a claim of breach of fiduciary duty owed by any stockholder, director, officer, other employee or stockholder of the Company to us or our stockholders; • any action arising pursuant to any provision of the DGCL or as to which the DGCL confers jurisdiction on the Court of Chancery of the State of Delaware; and • any action asserting a claim against us that is governed by the internal affairs doctrine.
Our amended and restated by-laws provide that consistent with the applicable provisions of the Delaware General Corporation Law (the “DGCL”), unless our Board of Directors, acting on behalf of the Company, consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware shall be the sole and exclusive forum for any and all internal corporate claims, including but not limited to: • any derivative action or proceeding brought on our behalf; • any action asserting a claim of breach of fiduciary duty owed by any stockholder, director, officer, other employee or stockholder of the Company to us or our stockholders; • any action arising pursuant to any provision of the DGCL or as to which the DGCL confers jurisdiction on the Court of Chancery of the State of Delaware; and • any action asserting a claim against us that is governed by the internal affairs doctrine.
We have attempted to offset increases in the minimum wage through pricing and various cost control efforts; however, there can be no assurance that we will be successful in these efforts in the future. The operation of our franchisee system is also subject to regulations enacted by a number of states and rules promulgated by the Federal Trade Commission.
We have attempted to offset increases in the minimum wage through pricing and various cost control efforts; however, there can be no assurance that we will be successful in these efforts in the future. 14 The operation of our franchisee system is also subject to regulations enacted by a number of states and rules promulgated by the Federal Trade Commission.
It is not possible to predict or identify all risk factors. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may also impair our business operations. 9 Risks Related to Macroeconomic Conditions A decline in general economic conditions could adversely affect our financial results.
It is not possible to predict or identify all risk factors. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may also impair our business operations. Risks Related to Macroeconomic Conditions A decline in general economic conditions could adversely affect our financial results.
For additional information concerning our indebtedness see “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources.” 16 Risks Related to our Common Stock Many factors, including those over which we have no control, affect the trading price of our common stock.
For additional information concerning our indebtedness see “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources.” Risks Related to our Common Stock Many factors, including those over which we have no control, affect the trading price of our common stock.
Such incidents or reports could negatively affect our brands and reputation, and a decrease in customer traffic resulting from these reports could negatively impact our revenues and profits. Similar incidents or reports occurring at other restaurant brands unrelated to us could likewise create negative publicity, which 11 could negatively impact consumer behavior towards us.
Such incidents or reports could negatively affect our brands and reputation, and a decrease in customer traffic resulting from these reports could negatively impact our revenues and profits. Similar incidents or reports occurring at other restaurant brands unrelated to us could likewise create negative publicity, which could negatively impact consumer behavior towards us.
Evolving business strategies or any failure to meet market expectations whether for same-store sales, restaurant unit growth, earnings per share, or other metrics could cause our share price to decline. Item 1B. Unresolved Staff Comments None.
Evolving business strategies or any failure to meet market expectations whether for same-restaurant sales, restaurant unit growth, earnings per share, or other metrics could cause our share price to decline. Item 1B. Unresolved Staff Comments None.
Any failure to maintain an effective system of internal control over financial reporting could limit our ability to report our financial results accurately and timely or to detect and prevent fraud.
Any failure to maintain an effective system of internal control over 15 financial reporting could limit our ability to report our financial results accurately and timely or to detect and prevent fraud.
Changes in these principles or their 15 interpretations or changes in underlying assumptions, estimates and judgments by us could significantly change our reported or expected financial performance.
Changes in these principles or their interpretations or changes in underlying assumptions, estimates and judgments by us could significantly change our reported or expected financial performance.
Multi-unit food service businesses such as ours can be materially and adversely affected by widespread negative publicity of any type, including food safety, outbreak of flu or viruses (such as COVID-19) or other health concerns, criminal activity, guest discrimination, harassment, employee relations or other operating issues.
Multi-unit food service businesses such as ours can be materially and adversely affected by widespread negative publicity of any type, including food safety, outbreak of flu or viruses or other health concerns, criminal activity, guest discrimination, harassment, employee relations or other operating issues.
In addition, the food service industry in general, and our results of operations and financial condition in particular, may be adversely affected by unfavorable trends or developments, such as: • volatility in certain commodity markets; • increased food costs; • health concerns arising from food safety issues and other food-related pandemics, outbreaks of flu or viruses, such as COVID-19, or other diseases; • increased energy costs; • labor and employee benefits costs (including increases in minimum hourly wage, employment tax rates, health care costs and workers’ compensation costs); • regional weather conditions; • the availability of experienced management and hourly employees; and • other general inflation impacts.
In addition, the food service industry in general, and our results of operations and financial condition in particular, may be adversely affected by unfavorable trends or developments, such as: • volatility in certain commodity markets; • increased food costs; • health concerns arising from food safety issues and other food-related pandemics, outbreaks of flu or viruses, such as COVID-19, avian flu (such as the outbreak ongoing in early 2025) or other diseases; • increased energy costs; • labor and employee benefits costs (including increases in minimum hourly wage, employment tax rates, health care costs and workers’ compensation costs); • regional weather conditions; • the availability of experienced management and hourly employees; and • other general inflation impacts.
Our amended and restated by-laws provide that the Court of Chancery of the State of Delaware will be the exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, employees or agents.
Further, adverse publicity resulting from claims may harm our business or that of our franchisees. 13 Our amended and restated by-laws provide that the Court of Chancery of the State of Delaware will be the exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, employees or agents.
Weakness or uncertainty regarding the economy, both domestic and international, as a result of reactions to consumer credit availability, increasing energy prices, inflation, increasing interest rates, unemployment, pandemics such as the COVID-19 pandemic, war, terrorist activity or other unforeseen events could adversely affect consumer spending habits, which may result in lower operating revenue.
Weakness or uncertainty regarding the economy, both domestic and international, as a result of reactions to consumer credit availability, increasing energy prices, inflation, increasing interest rates, unemployment, pandemics such as the COVID-19 pandemic and other outbreaks of illness, such as a higher than average rate of influenza, adverse weather conditions, natural disasters, war, terrorist activity or other unforeseen events could adversely affect consumer spending habits, which may result in lower operating revenue.
If we are unable to compete effectively, we could experience lower demand for our products, downward pressure on prices, reduced margins, a loss of market share, reduced franchisee profitability and an inability to attract qualified franchisees in the future. Our returns and profitability may be negatively impacted by a number of factors, including those described below.
If we are unable to compete effectively, we could experience lower demand for our products, downward pressure on prices, reduced margins, a loss of market share, reduced franchisee profitability and an inability to attract qualified franchisees in the future, all of which could lead to an increase in restaurant closures or an inability of current and future franchisees to open new restaurants. 10 Our returns and profitability may be negatively impacted by a number of factors, including those described below.
In addition, regardless of whether any claims against us are valid or whether we are found to be liable, claims may be expensive to defend, and may divert management’s attention away from operations and hurt our performance. Further, adverse publicity resulting from claims may harm our business or that of our franchisees.
In addition, regardless of whether any claims against us are valid or whether we are found to be liable, claims may be expensive to defend, and may divert management’s attention away from operations and hurt our performance.
We are also subject to federal, state, local and international laws regulating the offer and sale of franchises. Such laws impose registration and disclosure requirements on franchisors in the offer and sale of franchises, and may contain provisions that supersede the terms of franchise agreements, including limitations on the ability of franchisors to terminate franchises and alter franchise arrangements.
Such laws impose registration and disclosure requirements on franchisors in the offer and sale of franchises, and may contain provisions that supersede the terms of franchise agreements, including limitations on the ability of franchisors to terminate franchises and alter franchise arrangements.
If we or our franchisees fail to comply with these laws and regulations, we or our franchisees could be subjected to restaurant closure, fines, penalties and litigation, which may be costly and could adversely affect our results of operations and financial condition.
If we or our franchisees fail to comply with these laws and regulations, we or our franchisees could be subjected to restaurant closure, fines, penalties and litigation, which may be costly and could adversely affect our results of operations and financial condition. In addition, the future enactment of additional legislation regulating the franchise relationship could adversely affect our operations.
If a significant number of franchisees become financially distressed, it could harm our operating results. For 2023, our ten largest franchisees accounted for approximately 38% of our total franchise and license revenue. The balance of our franchise revenue was derived from the remaining 224 Denny’s and Keke’s franchisees.
If a significant number of franchisees become financially distressed, it could harm our operating results. For 2024, our ten largest franchisees accounted for approximately 38% of our total franchise and license revenue.
The locations of company and franchised restaurants may cease to be attractive as demographic patterns change. The success of our company and franchised restaurants is significantly influenced by location. Current locations may not continue to be attractive as demographic patterns change.
The balance of our franchise revenue was derived from the remaining 218 Denny’s and Keke’s franchisees. 11 The locations of company and franchised restaurants may cease to be attractive as demographic patterns change. The success of our company and franchised restaurants is significantly influenced by location. Current locations may not continue to be attractive as demographic patterns change.
Consumer spending habits, including discretionary spending on dining at restaurants such as ours, are affected by many factors including: • prevailing economic conditions, including interest rates; • energy costs, especially gasoline prices; • levels of employment; • salaries and wage rates, including tax rates; and • consumer confidence.
Consumer spending habits, including discretionary spending on dining at restaurants such as ours, are affected by many factors including: • prevailing economic conditions, including interest rates; • energy costs, especially gasoline prices; • levels of employment; • salaries and wage rates, including tax rates; • other taxes; • increased uncertainty related to tariffs; • impacts on food prices, especially in regards to egg prices, resulting from the most recent outbreak of avian flu; and • consumer confidence.
We continue to recruit, retain and motivate management and other employees sufficiently to maintain our current business and support our projected growth. We have experienced and may continue to experience challenges in recruiting and retaining team members in various locations.
We continue to recruit, retain and motivate management and other employees sufficiently to maintain our current business and support our projected growth.
Risks Related to Development Strategies Our growth strategy depends on our ability and that of our franchisees to open new restaurants.
We have experienced and may continue to experience challenges in recruiting and retaining team members in various locations. 12 Risks Related to Development Strategies Our growth strategy depends on our ability and that of our franchisees to open new restaurants.
We conduct third-party due diligence and seek to obtain contractual assurance that our vendors will maintain adequate controls, such as adequate security against data breaches. However, the failure of our suppliers to maintain adequate controls or comply with our expectations and standards could have a material adverse effect on our business, financial condition and operating results.
We conduct third-party due diligence and seek to obtain contractual assurance that our vendors will maintain adequate controls, such as adequate security against data breaches.
In addition, the future enactment of additional legislation regulating the franchise relationship could adversely affect our operations. 14 We have implemented applicable aspects of The Patient Protection and Affordable Care Act and the Health Care and Education Affordability Reconciliation Act. However, the law or other related requirements may change.
We have implemented applicable aspects of The Patient Protection and Affordable Care Act and the Health Care and Education Affordability Reconciliation Act. However, the law or other related requirements may change. We are also subject to federal, state, local and international laws regulating the offer and sale of franchises.
Under this broader standard, which goes into effect on February 26, 2024, we could potentially be liable for unfair labor practices and other violations by franchisees or we could be required to conduct collective bargaining negotiations regarding employees of franchisees, who are independent employers.
As the joint employer standard reverts to the 2020 rule, and with the looming possibility of the establishment of a new standard through rulemaking or case adjudication, we face challenges in accurately assessing potential impacts, which could include liability for unfair labor practices and other violations by franchisees or we could be required to conduct collective bargaining negotiations regarding employees of franchisees, who are independent employers.
Removed
In October 2023, the National Labor Relations Board issued a new rule that would allow a party asserting a joint-employment relationship to establish joint-employer status by using evidence of indirect and reserved forms of control bearing on an employee’s essential terms and conditions of employment.
Added
Dependence on frequent deliveries of fresh produce and other food products subjects food service businesses to the risk that shortages or interruptions in supply caused by adverse weather, food safety warnings, animal disease outbreak or other conditions beyond our control could adversely affect the availability, quality and cost of ingredients.
Removed
Risks Related to Indebtedness Our indebtedness could have an adverse effect on our financial condition and operations. As of December 27, 2023, we had total indebtedness of $266.0 million, including finance leases.
Added
Following the federal court’s invalidation of the National Labor Relations Board’s 2023 rule, the legal standards around joint employment continue to evolve as the likelihood of the National Labor Relations Board addressing joint employer liability in a new rulemaking or through adjudication remains.
Added
However, the failure of our suppliers to maintain adequate controls or comply with our expectations and standards could have a material adverse effect on our business, financial condition and operating results. 16 Risks Related to Indebtedness Our indebtedness could have an adverse effect on our financial condition and operations.
Added
As of December 25, 2024, we had total indebtedness of $271.9 million, including finance leases.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeDenny’s faces various risks associated with cybersecurity threats that could materially affect our business. In the event of a material cybersecurity incident, we are committed to promptly informing our shareholders, customers, and regulatory authorities, as required by law and regulations.
Biggest changeIn the event of a material cybersecurity incident, we are committed to promptly informing our shareholders, customers, and regulatory authorities, as required by applicable law and regulations. 17 We have not identified any risks from cybersecurity threats (including as a result of any previous cybersecurity incidents) that have materially affected or are reasonably likely to materially affect our business strategy, results of operations or financial condition.
On an annual basis, we perform a cybersecurity risk assessment to identify and evaluate risks and potential vulnerabilities that could impact our business. Cybersecurity is also assessed as part of our enterprise risk management program.
On an annual basis, we perform a cybersecurity risk assessment to identify and evaluate risks and potential vulnerabilities that could impact our business. Cybersecurity is also assessed as part of our compliance program.
In addition, the Company has a Compliance Committee comprised of members of management from our IT Security & Compliance, Legal and Internal Audit teams who work cross-functionally to assess and manage enterprise-wide risks, including cybersecurity. Our Senior Director, IT Security & Compliance leads a team of qualified individuals with decades of combined experience in cybersecurity risk management and compliance.
In addition, the Company has a Compliance Committee comprised of members of management from our IT Security & Compliance, Legal and Internal Audit teams who work cross-functionally to assess and manage enterprise-wide risks, including cybersecurity. Our Senior Vice President and Chief Technology Officer leads a team of qualified individuals with decades of combined experience in cybersecurity risk management and compliance.
Governance Our Chief Digital & Technology Officer and Senior Director, IT Security & Compliance lead our cybersecurity efforts with bi-annual updates that include certain metrics, data privacy, and other information technology risks, provided to the Audit and Finance Committee of our Board of Directors. Cybersecurity is a top priority for our Audit Committee.
Governance Our Senior Vice President and Chief Technology Officer leads our cybersecurity efforts with periodic updates that include certain metrics, data privacy, and other information technology risks, provided to the Audit and Finance Committee of our Board of Directors. Cybersecurity is a top priority for our Audit and Finance Committee.
Added
Denny’s faces various risks associated with cybersecurity threats that could materially affect our business.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThe restaurant buildings average between 4,000 - 5,000 square feet, allowing them to accommodate an average of 135 - 170 guests. 17 The number and location of our restaurants as of December 27, 2023 are presented below: United States - Denny’s Company Franchised / Licensed Total Alabama — 6 6 Alaska — 1 1 Arizona 1 83 84 Arkansas — 10 10 California 22 341 363 Colorado — 20 20 Connecticut — 5 5 Delaware — 1 1 District of Columbia — 2 2 Florida 9 115 124 Georgia — 11 11 Hawaii 2 4 6 Idaho — 11 11 Illinois — 44 44 Indiana — 30 30 Iowa — 3 3 Kansas — 4 4 Kentucky — 11 11 Louisiana — 6 6 Maine — 3 3 Maryland — 23 23 Massachusetts 2 3 5 Michigan — 13 13 Minnesota — 13 13 Mississippi — 4 4 Missouri — 28 28 Montana — 2 2 Nebraska — 3 3 Nevada 7 33 40 New Hampshire 2 — 2 New Jersey — 6 6 New Mexico — 29 29 New York — 37 37 North Carolina — 18 18 North Dakota — 3 3 Ohio — 31 31 Oklahoma — 10 10 Oregon — 21 21 Pennsylvania — 35 35 Rhode Island — 2 2 South Carolina 3 8 11 South Dakota — 1 1 Tennessee — 4 4 Texas 14 190 204 Utah — 24 24 Vermont 1 — 1 Virginia 2 18 20 Washington — 41 41 West Virginia — 4 4 Wisconsin — 23 23 Wyoming — 4 4 Total Domestic - Denny’s 65 1,342 1,407 18 International - Denny’s Company Franchised / Licensed Total Canada — 86 86 Costa Rica — 3 3 Curacao N.V. — 1 1 El Salvador — 3 3 Guam — 2 2 Guatemala — 4 4 Honduras — 6 6 Indonesia — 2 2 Mexico — 15 15 New Zealand — 7 7 Philippines — 15 15 Puerto Rico — 16 16 United Arab Emirates — 5 5 United Kingdom — 1 1 Total International - Denny’s — 166 166 Total Domestic - Denny’s 65 1,342 1,407 Total - Denny’s 65 1,508 1,573 United States - Keke’s Company Franchised / Licensed Total Florida 8 50 58 Total Domestic - Keke’s 8 50 58 Total 73 1,558 1,631 Of our total 1,631 restaurants, our interest in restaurant properties consists of the following: Company Restaurants Franchised Restaurants Total Owned properties 16 61 77 Leased properties 57 134 191 73 195 268 We have generally been able to renew our restaurant leases as they expire at then-current market rates.
Biggest changeThe restaurant buildings average between 4,000 - 5,000 square feet, allowing them to accommodate an average of 135 - 170 guests. 18 The number and location of our restaurants as of December 25, 2024 are presented below: United States - Denny’s Company Franchised / Licensed Total Alabama — 5 5 Alaska — 1 1 Arizona 1 79 80 Arkansas — 8 8 California 22 332 354 Colorado — 18 18 Connecticut — 5 5 Delaware — 1 1 District of Columbia — 2 2 Florida 9 108 117 Georgia — 10 10 Hawaii 2 3 5 Idaho — 7 7 Illinois — 43 43 Indiana — 30 30 Iowa — 3 3 Kansas — 4 4 Kentucky — 10 10 Louisiana — 6 6 Maine — 2 2 Maryland — 23 23 Massachusetts 1 3 4 Michigan — 12 12 Minnesota — 13 13 Mississippi — 4 4 Missouri — 26 26 Montana — 2 2 Nebraska — 3 3 Nevada 7 33 40 New Hampshire 2 — 2 New Jersey — 6 6 New Mexico — 29 29 New York — 33 33 North Carolina — 17 17 North Dakota — 3 3 Ohio — 26 26 Oklahoma — 7 7 Oregon — 18 18 Pennsylvania — 33 33 Rhode Island — 2 2 South Carolina — 9 9 South Dakota — 1 1 Tennessee — 4 4 Texas 14 180 194 Utah — 21 21 Vermont 1 — 1 Virginia 2 18 20 Washington — 41 41 West Virginia — 2 2 Wisconsin — 23 23 Wyoming — 4 4 Total Domestic - Denny’s 61 1,273 1,334 19 International - Denny’s Company Franchised / Licensed Total Canada — 86 86 Costa Rica — 3 3 Curacao N.V. — 1 1 El Salvador — 3 3 Guam — 2 2 Guatemala — 4 4 Honduras — 7 7 Indonesia — 2 2 Mexico — 15 15 New Zealand — 7 7 Philippines — 14 14 Puerto Rico — 15 15 United Arab Emirates — 5 5 United Kingdom — 1 1 Total International - Denny’s — 165 165 Total Domestic - Denny’s 61 1,273 1,334 Total - Denny’s 61 1,438 1,499 United States - Keke’s Company Franchised / Licensed Total California — 1 1 Colorado — 1 1 Florida 9 52 61 Tennessee 3 — 3 Texas 2 — 2 Nevada — 1 1 Total Domestic - Keke’s 14 55 69 Total 75 1,493 1,568 Of our total 1,568 restaurants, our interest in restaurant properties consists of the following: Company Restaurants Franchised Restaurants Total Owned properties 17 60 77 Leased properties 58 131 189 75 191 266 We have generally been able to renew our restaurant leases as they expire at then-current market rates.
The Spartanburg office is an 18-story, 187,000 square foot office building where we occupy 16 floors with a portion of the building leased to others. See Note 10 to our Consolidated Financial Statements for information concerning encumbrances on substantially all of our properties.
The Spartanburg office is an 18-story, 187,000 square foot office building where we occupy 17 floors with a portion of the building leased to others. See Note 10 to our consolidated financial statements for information concerning encumbrances on substantially all of our properties.
The remaining terms of leases range from less than one to approximately 39 years, including optional renewal periods. Our corporate offices include an owned building in Spartanburg, South Carolina and leased buildings in Irving, Texas and in Orlando, Florida.
The remaining terms of leases range from less than one to approximately 38 years, including optional renewal periods. Our corporate offices include an owned building in Spartanburg, South Carolina and leased buildings in Irving, Texas and in Orlando, Florida.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeIn the opinion of management, based upon information currently available, the ultimate liability with respect to these proceedings and claims will not materially affect the Company’s consolidated results of operations or financial position. Item 4. Mine Safety Disclosures Not applicable. 19 PART II
Biggest changeIn the opinion of management, based upon information currently available, the ultimate liability with respect to these proceedings and claims will not materially affect the Company’s consolidated results of operations or financial position. 20 Item 4. Mine Safety Disclosures Not applicable. PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

8 edited+3 added−2 removed3 unchanged
Biggest changeDuring the quarter ended December 27, 2023, we purchased 1.8 million shares of our common stock for an aggregate consideration of $16.2 million pursuant to this share repurchase program. 20 Performance Graph The following graph compares the cumulative total shareholder return on our common stock for the five fiscal years ended December 27, 2023 (December 26, 2018 to December 27, 2023) against the cumulative total return of the Russell 2000® Index and a peer group, selected by us, of companies that we believe compose a representative sampling of public companies in our industry comparable to us in size and composition.
Biggest changeHowever, we did not repurchase any shares of our common stock during the quarter ended December 25, 2024. 21 Performance Graph The following graph compares the cumulative total shareholder return on our common stock for the five fiscal years ended December 25, 2024 (December 25, 2019 to December 25, 2024) against the cumulative total return of the Russell 2000® Index and a peer group, selected by us, of companies that we believe compose a representative sampling of public companies in our industry comparable to us in size and composition.We revised this peer group in 2024 to more closely reflect a representative sampling of comparative companies in our industry.
(2) On December 2, 2019, we announced that our Board of Directors approved a new share repurchase program, authorizing us to repurchase up to an additional $250 million of our common stock (in addition to prior authorizations).
On December 2, 2019, we announced that our Board of Directors approved a new share repurchase program, authorizing us to repurchase up to an additional $250 million of our common stock (in addition to prior authorizations).
The graph and table assume that $100 was invested on December 26, 2018 (the last day of fiscal year 2018) in each of the Company’s common stock, the Russell 2000® Index and the current and former peer groups and that all dividends were reinvested.
The graph and table assume that $100 was invested on December 25, 2019 (the last day of fiscal year 2019) in each of the Company’s common stock, the Russell 2000® Index and the current and former peer groups and that all dividends were reinvested.
(BLMN), Brinker International, Inc. (EAT), Cracker Barrel Old Country Store, Inc. (CBRL), Dine Brands Global, Inc. (DIN), El Pollo Loco Holdings, Inc. (LOCO), Fiesta Restaurant Group, Inc. (FRGI), Jack in the Box Inc. (JACK), Noodles & Company (NDLS), Ruth’s Hospitality Group, Inc. (RUTH), Shake Shack, Inc. (SHAK), Texas Roadhouse, Inc. (TXRH), The Cheesecake Factory Incorporated (CAKE), and Wingstop Inc. (WING).
(EAT), Cracker Barrel Old Country Store, Inc. (CBRL), Dine Brands Global, Inc. (DIN), El Pollo Loco Holdings, Inc. (LOCO), Fiesta Restaurant Group, Inc. (FRGI), Jack in the Box Inc. (JACK), Noodles & Company (NDLS), Ruth’s Hospitality Group, Inc. (RUTH), Shake Shack, Inc. (SHAK), Texas Roadhouse, Inc. (TXRH), The Cheesecake Factory Incorporated (CAKE), and Wingstop Inc. (WING). Item 6. Reserved
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Our common stock is listed under the symbol “DENN” and trades on the Nasdaq Capital Market (“Nasdaq”). As of February 22, 2024, there were 52,253,719 shares of our common stock outstanding and approximately 36,000 record and beneficial holders of our common stock.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Our common stock is listed under the symbol “DENN” and trades on the Nasdaq Capital Market (“Nasdaq”). As of February 20, 2025, there were 51,611,066 shares of our common stock outstanding and approximately 36,000 record and beneficial holders of our common stock.
As of December 27, 2023, the weighted average market capitalization of companies within the index was approximately $2.7 billion with the median market capitalization being approximately $0.8 billion. (2) The peer group consists of 14 public companies that operate in the restaurant industry. The peer group includes the following companies: BJ’s Restaurants, Inc. (BJRI), Bloomin’ Brands, Inc.
As of December 25, 2024, the weighted average market capitalization of companies within the index was approximately $3.6 billion with the median market capitalization being approximately $1.0 billion. (2) The current peer group consists of 13 public companies that operate in the restaurant industry. BJ’s Restaurants, Inc. (BJRI), Bloomin’ Brands, Inc. (BLMN), Brinker International, Inc.
Though we have not historically paid cash dividends and currently do not expect to do so in the foreseeable future, we have in recent years undertaken share repurchases. The table below provides information concerning repurchases of shares of our common stock during the quarter ended December 27, 2023.
Though we have not historically paid cash dividends and currently do not expect to do so in the foreseeable future, we have in recent years undertaken share repurchases.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL SHAREHOLDER RETURN ASSUMES $100 INVESTED ON DECEMBER 26, 2018 ASSUMES DIVIDENDS REINVESTED FISCAL YEAR ENDED DECEMBER 27, 2023 Russell 2000® Index (1) Peer Group (2) Denny’s Corporation December 26, 2018 $ 100.00 $ 100.00 $ 100.00 December 25, 2019 $ 128.02 $ 106.15 $ 124.54 December 30, 2020 $ 153.21 $ 124.28 $ 86.78 December 29, 2021 $ 175.71 $ 129.52 $ 96.56 December 28, 2022 $ 136.41 $ 110.20 $ 55.34 December 27, 2023 $ 166.29 $ 153.83 $ 67.08 (1) The Russell 2000 Index is a broad equity market index of 2,000 companies that measures the performance of the small-cap segment of the U.S. equity universe.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL SHAREHOLDER RETURN ASSUMES $100 INVESTED ON DECEMBER 25, 2019 ASSUMES DIVIDENDS REINVESTED FISCAL YEAR ENDED DECEMBER 25, 2024 Russell 2000® Index (1) Current Peer Group (2) Former Peer Group (3) Denny’s Corporation December 25, 2019 $ 100.00 $ 100.00 $ 100.00 $ 100.00 December 30, 2020 $ 119.67 $ 118.14 $ 117.09 $ 69.68 December 29, 2021 $ 137.25 $ 122.99 $ 122.02 $ 77.53 December 28, 2022 $ 106.56 $ 105.20 $ 103.82 $ 44.44 December 27, 2023 $ 129.89 $ 147.36 $ 144.93 $ 53.86 December 25, 2024 $ 144.02 $ 189.83 $ 187.29 $ 28.98 (1) The Russell 2000 Index is a broad equity market index of 2,000 companies that measures the performance of the small-cap segment of the U.S. equity universe.
Removed
Period Total Number of Shares Purchased Average Price Paid Per Share (1) Total Number of Shares Purchased as Part of Publicly Announced Programs (2) Approximate Dollar Value of Shares that May Yet be Purchased Under the Programs (2) (In thousands, except per share amounts) September 28, 2023 – October 25, 2023 900 $ 8.52 900 $ 108,917 October 26, 2023 – November 22, 2023 600 8.94 600 $ 103,542 November 23, 2023 – December 27, 2023 292 10.09 292 $ 100,428 Total 1,792 $ 8.91 1,792 (1) Average price paid per share excludes commissions.
Added
As required by SEC regulations, the following graph also shows the cumulative return of the former peer group.
Removed
Del Taco Restaurants, Inc. (TACO), which had previously appeared in our peer group, was acquired and is no longer an independent public company. 21 Item 6. Reserved
Added
(EAT), Cracker Barrel Old Country Store, Inc. (CBRL), Dine Brands Global, Inc. (DIN), El Pollo Loco Holdings, Inc. (LOCO), Jack in the Box Inc. (JACK), Noodles & Company (NDLS), PotBelly Corporation (PBPB), Shake Shack, Inc. (SHAK), Texas Roadhouse, Inc. (TXRH), The Cheesecake Factory Incorporated (CAKE), and Wingstop Inc. (WING).
Added
Former peer group members Fiesta Group Restaurant, Inc. and Ruth’s Hospitality Group, Inc. were no longer public companies in 2024. 22 (3) The former peer group consists of 14 public companies that operate in the restaurant industry. The peer group includes the following companies: BJ’s Restaurants, Inc. (BJRI), Bloomin’ Brands, Inc. (BLMN), Brinker International, Inc.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

81 edited+12 added−15 removed31 unchanged
Biggest changeManagement’s Discussion and Analysis of Financial Condition and Results of Operations relates to the Denny’s brand unless otherwise noted. 23 Statements of Income Fiscal Year Ended December 27, 2023 December 28, 2022 December 29, 2021 (Dollars in thousands) Revenue: Company restaurant sales $ 215,532 46.5 % $ 199,753 43.8 % $ 175,017 44.0 % Franchise and license revenue 248,390 53.5 % 256,676 56.2 % 223,157 56.0 % Total operating revenue 463,922 100.0 % 456,429 100.0 % 398,174 100.0 % Costs of company restaurant sales, excluding depreciation and amortization (a): Product costs 55,789 25.9 % 53,617 26.8 % 42,982 24.6 % Payroll and benefits 80,666 37.4 % 76,412 38.3 % 65,337 37.3 % Occupancy 17,080 7.9 % 15,154 7.6 % 11,662 6.7 % Other operating expenses 34,064 15.8 % 34,275 17.2 % 26,951 15.4 % Total costs of company restaurant sales, excluding depreciation and amortization 187,599 87.0 % 179,458 89.8 % 146,932 84.0 % Costs of franchise and license revenue (a) 122,452 49.3 % 135,327 52.7 % 109,140 48.9 % General and administrative expenses 77,770 16.8 % 67,173 14.7 % 68,686 17.3 % Depreciation and amortization 14,385 3.1 % 14,862 3.3 % 15,446 3.9 % Goodwill impairment charges 6,363 1.4 % — — % — — % Operating (gains), losses and other charges, net 2,530 0.5 % (1,005) (0.2) % (46,105) (11.6) % Total operating costs and expenses, net 411,099 88.6 % 395,815 86.7 % 294,099 73.9 % Operating income 52,823 11.4 % 60,614 13.3 % 104,075 26.1 % Interest expense, net 17,597 3.8 % 13,769 3.0 % 15,148 3.8 % Other nonoperating income, net 8,288 1.8 % (52,585) (11.5) % (15,176) (3.8) % Net income before income taxes 26,938 5.8 % 99,430 21.8 % 104,103 26.1 % Provision for income taxes 6,993 1.5 % 24,718 5.4 % 26,030 6.5 % Net income $ 19,945 4.3 % $ 74,712 16.4 % $ 78,073 19.6 % (a) Costs of company restaurant sales percentages are as a percentage of company restaurant sales.
Biggest changeManagement’s Discussion and Analysis of Financial Condition and Results of Operations relates to the Denny’s brand unless otherwise noted. 24 Statements of Income Fiscal Year Ended December 25, 2024 December 27, 2023 December 28, 2022 (Dollars in thousands) Revenue: Company restaurant sales $ 211,781 46.8 % $ 215,532 46.5 % $ 199,753 43.8 % Franchise and license revenue 240,553 53.2 % 248,390 53.5 % 256,676 56.2 % Total operating revenue 452,334 100.0 % 463,922 100.0 % 456,429 100.0 % Costs of company restaurant sales, excluding depreciation and amortization (a)(b): Product costs 53,931 25.5 % 55,789 25.9 % 53,617 26.8 % Payroll and benefits 80,605 38.1 % 80,666 37.4 % 76,412 38.3 % Occupancy 18,129 8.6 % 16,809 7.8 % 15,154 7.6 % Other operating expenses 37,079 17.5 % 34,335 15.9 % 34,275 17.2 % Total costs of company restaurant sales, excluding depreciation and amortization 189,744 89.6 % 187,599 87.0 % 179,458 89.8 % Costs of franchise and license revenue (a) 120,226 50.0 % 122,452 49.3 % 135,327 52.7 % General and administrative expenses 80,197 17.7 % 77,770 16.8 % 67,173 14.7 % Depreciation and amortization 14,857 3.3 % 14,385 3.1 % 14,862 3.3 % Goodwill impairment charges 20 0.0 % 6,363 1.4 % — — % Operating (gains), losses and other charges, net 1,974 0.4 % 2,530 0.5 % (1,005) (0.2) % Total operating costs and expenses, net 407,018 90.0 % 411,099 88.6 % 395,815 86.7 % Operating income 45,316 10.0 % 52,823 11.4 % 60,614 13.3 % Interest expense, net 17,974 4.0 % 17,597 3.8 % 13,769 3.0 % Other nonoperating (income) expense, net (1,907) (0.4) % 8,288 1.8 % (52,585) (11.5) % Net income before income taxes 29,249 6.5 % 26,938 5.8 % 99,430 21.8 % Provision for income taxes 7,678 1.7 % 6,993 1.5 % 24,718 5.4 % Net income $ 21,571 4.8 % $ 19,945 4.3 % $ 74,712 16.4 % (a) Costs of company restaurant sales percentages are as a percentage of company restaurant sales.
This decrease was the result of completion of the kitchen modernization program in 2023 that began in early 2022.
This decrease was the result of completion in 2023 of the kitchen modernization program that began in early 2022.
See Part II Item 7A. Quantitative and Qualitative Disclosures About Market Risk for details on our interest rate swaps. Technology Transformation and Kitchen Modernization Initiatives The Company has committed to investing approximately $4 million toward a new cloud-based restaurant technology platform in domestic franchise restaurants, which will lay the foundation for future technology initiatives to further enhance the guest experience.
See Part II Item 7A. Quantitative and Qualitative Disclosures About Market Risk for details on our interest rate swaps. Technology Transformation Initiatives The Company has committed to investing approximately $4 million toward a new cloud-based restaurant technology platform in domestic franchise restaurants, which will lay the foundation for future technology initiatives to further enhance the guest experience.
Inputs used are generally obtained from historical data supplemented by current and anticipated market conditions and growth rates. 33 The market approach involves the selection and application of cash flows multiples of a group of similar companies to the projected cash flows of the reporting unit. Considerable management judgment is necessary in determining the inputs to these approaches.
Inputs used are generally obtained from historical data supplemented by current and anticipated market conditions and growth rates. 34 The market approach involves the selection and application of cash flows multiples of a group of similar companies to the projected cash flows of the reporting unit. Considerable management judgment is necessary in determining the inputs to these approaches.
As we are not able to reasonably estimate the timing or amount of these payments, the related balances have not been reflected in this table. 32 Critical Accounting Policies and Estimates Our reported results are impacted by the application of certain accounting policies that require us to make subjective or complex judgments.
As we are not able to reasonably estimate the timing or amount of these payments, the related balances have not been reflected in this table. 33 Critical Accounting Policies and Estimates Our reported results are impacted by the application of certain accounting policies that require us to make subjective or complex judgments.
Advertising revenue increased $2.6 million, or 3.4%, in 2023 primarily resulting from the increase in Denny’s domestic franchise same-store sales. The increase also includes $0.6 million collected from Keke’s franchised restaurants. The 2023 increase was partially offset by a decrease of 39 Denny’s franchise equivalent units.
Advertising revenue increased $2.6 million, or 3.4%, in 2023 primarily resulting from the increase in Denny’s domestic franchise same-restaurant sales. The increase also includes $0.6 million collected from Keke’s franchised restaurants. The 2023 increase was partially offset by a decrease of 39 Denny’s franchise equivalent units.
The Denny’s reportable segment includes the results of all company and franchised and licensed Denny’s restaurants. Denny’s restaurants are operated in 50 states, the District of Columbia, two U.S. territories and 12 foreign countries with principal concentrations in California (23% of total restaurants), Texas (13%) and Florida (8%).
The Denny’s reportable segment includes the results of all company and franchised and licensed Denny’s restaurants. Denny’s restaurants are operated in 50 states, the District of Columbia, two U.S. territories and 12 foreign countries with principal concentrations in California (24% of total restaurants), Texas (13%) and Florida (8%).
While we do not record franchise and licensed sales as revenue in our consolidated financial statements, we believe domestic franchised same-store sales information is useful to investors in understanding our financial performance, as our sales-based royalties are calculated based on a percentage of franchise sales.
While we do not record franchise and licensed sales as revenue in our consolidated financial statements, we believe domestic franchised same-restaurant sales information is useful to investors in understanding our financial performance, as our sales-based royalties are calculated based on a percentage of franchise sales.
(d) Refer to Note 12 to our Consolidated Financial Statements for a further discussion of our defined benefit plan obligations and timing of expected payments. (e) Refer to Note 19 to our Consolidated Financial Statements for a further discussion of our purchase obligations and timing of expected payments. (f) Unrecognized tax benefits are related to uncertain tax positions.
(d) Refer to Note 12 to our consolidated financial statements for a further discussion of our defined benefit plan obligations and timing of expected payments. (e) Refer to Note 18 to our consolidated financial statements for a further discussion of our purchase obligations and timing of expected payments. (f) Unrecognized tax benefits are related to uncertain tax positions.
(b) Same-store sales include sales from company restaurants or non-consolidated franchised and licensed restaurants that were open the same period in the prior year.
(b) Same-restaurant sales include sales from company restaurants or non-consolidated franchised and licensed restaurants that were open the same period in the prior year.
For long-term debt with variable rates, we have used the rate applicable at December 27, 2023 to project interest over the periods presented in the table above, taking into consideration the impact of the interest rate swaps that are designated as cash flow hedges for the applicable periods. The finance lease obligation amounts above are inclusive of interest.
For long-term debt with variable rates, we have used the rate applicable at December 25, 2024 to project interest over the periods presented in the table above, taking into consideration the impact of the interest rate swaps that are designated as cash flow hedges for the applicable periods. The finance lease obligation amounts above are inclusive of interest.
For example, if the discount rate increased by 0.5%, the impairment would have increased by approximately $1.5 million.
In 2023, for example, if the discount rate increased by 0.5%, the impairment would have increased by approximately $1.5 million.
Total workers’ compensation, general, product and automobile insurance liabilities were $9.7 million at December 27, 2023 and December 28, 2022, respectively. See Note 2 to our Consolidated Financial Statements for a further discussion of our policies regarding self-insurance liabilities. Impairment of long-lived assets .
Total workers’ compensation, general, product and automobile insurance liabilities were $9.3 million and $9.7 million at December 25, 2024 and December 27, 2023, respectively. See Note 2 to our consolidated financial statements for a further discussion of our policies regarding self-insurance liabilities. Impairment of long-lived assets .
(b) Refer to Note 9 to our Consolidated Financial Statements for a further discussion of our lease obligations and timing of expected payments. (c) Interest obligations represent payments related to our long-term debt outstanding at December 27, 2023.
(b) Refer to Note 9 to our consolidated financial statements for a further discussion of our lease obligations and timing of expected payments. (c) Interest obligations represent payments related to our long-term debt outstanding at December 25, 2024.
For 2021, the difference in the overall effective rate from the U.S. statutory rate was primarily due to state and foreign taxes, partially offset by the generation of employment credits. The 2021 rate was also impacted by $1.3 million of disallowed compensation deductions.
For 2024, the difference in the overall effective rate from the U.S. statutory rate was primarily due to state and foreign taxes, partially offset by the generation of employment and foreign tax credits. The 2024 rate was also impacted by $1.8 million of disallowed compensation deductions.
At December 27, 2023 and December 28, 2022, the carrying value of Keke’s goodwill totaled approximately $28.4 million and $35.2 million, respectively. See Note 2, Note 6 and Note 8 to our Consolidated Financial Statements for further discussion of our policies regarding impairment of goodwill.
At December 25, 2024 and December 27, 2023, the carrying value of Keke’s goodwill totaled approximately $28.9 million and $28.4 million, respectively. See Note 2, Note 6 and Note 8 to our consolidated financial statements for further discussion of our policies regarding impairment of goodwill.
Taking into consideration our interest rate swaps that are designated as cash flow hedges, the weighted-average interest rate of outstanding revolver loans was 5.04% and 5.31% as of December 27, 2023 and December 28, 2022, respectively. Interest Rate Hedges We have interest rate swaps to hedge a portion of the forecasted cash flows of our floating rate debt.
Taking into consideration our interest rate swaps that are designated as cash flow hedges, the weighted-average interest rate of outstanding revolver loans was 5.01% and 5.04% as of December 25, 2024 and December 27, 2023, respectively. Interest Rate Hedges We have interest rate swaps to hedge a portion of the forecasted cash flows of our floating rate debt.
Recent Accounting Pronouncements See the Accounting Standards to be Adopted section of Note 2 to our Consolidated Financial Statements for further details of recent accounting pronouncements.
Recent Accounting Pronouncements See the “Accounting Standards to be Adopted” section of Note 2 to our consolidated financial statements for further details of recent accounting pronouncements.
Accordingly, domestic franchised same-store sales should be considered as a supplement to, not a substitute for, our results as reported under GAAP. (c) Prior year amounts have not been restated for 2023 comparable restaurants. (d) Effective July 20, 2022, the Company acquired Keke’s, and as such, data for the year ended December 28, 2022 only represent post-acquisition results.
Accordingly, domestic franchised same-restaurant sales should be considered as a supplement to, not a substitute for, our results as reported under GAAP. (c) Prior year amounts have not been restated for 2024 comparable restaurants. (d) Effective July 20, 2022, the Company acquired Keke’s. As a result, data presented for the year ended December 28, 2022 only represent post-acquisition results.
We believe that our estimated cash flows from operations for 2024, combined with our capacity for additional borrowings under our credit facility, will enable us to meet our anticipated cash requirements and fund capital expenditures over the next twelve months. 30 Net cash flows used in investing activities were $7.6 million for the year ended December 27, 2023.
We believe that our estimated cash flows from operations for 2025, combined with our capacity for additional borrowings under our credit facility, will enable us to meet our anticipated cash requirements and fund capital expenditures over the next twelve months. 31 Net cash flows used in investing activities were $26.7 million for the year ended December 25, 2024.
Total revenues at Keke’s for the year ended December 27, 2023 represented less than 5% of total consolidated revenues, therefore, the Keke’s operating segment is included in Other for segment reporting purposes. Our Keke’s operating segment includes the results of all company and franchised Keke’s restaurants.
Total revenues at Keke’s for the year ended December 25, 2024 represented less than 10% of total consolidated revenues, therefore, the Keke’s operating segment is included in Other for segment reporting purposes. Our Keke’s operating segment includes the results of all company and franchised Keke’s restaurants.
The commitment fee, paid on the unused portion of the credit facility, was set to 0.30%. Prior to considering the impact of our interest rate swaps, described below, the weighted-average interest rate on outstanding revolver loans was 7.41% and 6.37% as of December 27, 2023 and December 28, 2022, respectively.
The commitment fee, paid on the unused portion of the credit facility, was set to 0.35%. Prior to considering the impact of our interest rate swaps, described below, the weighted-average interest rate on outstanding revolver loans was 6.98% and 7.41% as of December 25, 2024 and December 27, 2023, respectively.
Costs of franchise and license revenue decreased $12.9 million, or 9.5%, in 2023. Advertising costs increased $2.6 million, or 3.4%, which corresponds to the related advertising revenue increases noted above. Occupancy costs decreased $1.9 million, or 8.0%, in 2023, primarily related to lease terminations.
Occupancy revenue decreased $2.7 million, or 7.6%, in 2024 and $2.7 million, or 7.0%, in 2023 primarily due to lease terminations. 28 Costs of franchise and license revenue decreased $2.2 million, or 1.8%, in 2024. Advertising costs increased $1.5 million, or 1.9%, which corresponds to the related advertising revenue increases noted above.
For 2023, the decrease as a percentage of sales was primarily due to increased pricing to offset a portion of higher commodity costs. For 2022, the increase as a percentage of sales was primarily due to increased commodity costs. Payroll and benefits as a percentage of company restaurant sales were 37.4% in 2023, 38.3% in 2022 and 37.3% in 2021.
For 2024 and 2023, the decreases as a percentage of sales were primarily due to increased pricing to offset a portion of higher commodity costs. Payroll and benefits as a percentage of company restaurant sales were 38.1% in 2024, 37.4% in 2023 and 38.3% in 2022.
The increase in cash flows provided by operating activities was primarily due to the timing of inventory purchases, receivables collections, and accrual payments related to our franchise kitchen equipment project over the past two years.
The increase in cash flows provided by operating activities was primarily due to the timing of inventory purchases, receivables collections, and accrual payments related to our franchise kitchen equipment project during 2022 and 2023.
The following table presents a summary of our sources and uses of cash and cash equivalents for the periods indicated: Fiscal Year Ended December 27, 2023 December 28, 2022 December 29, 2021 (In thousands) Net cash provided by operating activities $ 72,125 $ 39,452 $ 76,173 Net cash (used in) provided by investing activities (7,564) (86,596) 29,014 Net cash (used in) provided by financing activities (63,191) 20,043 (78,455) Increase (decrease) in cash and cash equivalents $ 1,370 $ (27,101) $ 26,732 Net cash flows provided by operating activities were $72.1 million for the year ended December 27, 2023 compared to net cash flows provided by operating activities of $39.5 million for the year ended December 28, 2022.
The following table presents a summary of our sources and uses of cash and cash equivalents for the periods indicated: Fiscal Year Ended December 25, 2024 December 27, 2023 December 28, 2022 (In thousands) Net cash provided by operating activities $ 29,487 $ 72,125 $ 39,452 Net cash used in investing activities (26,673) (7,564) (86,596) Net cash (used in) provided by financing activities (6,009) (63,191) 20,043 Increase (decrease) in cash and cash equivalents $ (3,195) $ 1,370 $ (27,101) Net cash flows provided by operating activities were $29.5 million for the year ended December 25, 2024 compared to net cash flows provided by operating activities of $72.1 million for the year ended December 27, 2023.
Interest expense, net consisted of the following: Fiscal Year Ended December 27, 2023 December 28, 2022 December 29, 2021 (In thousands) Interest on credit facilities $ 18,929 $ 8,478 $ 5,478 Interest on interest rate swaps (5,028) 1,310 4,023 Interest on finance lease liabilities 2,139 2,350 2,960 Letters of credit and other fees 738 1,053 1,438 Interest income (171) (87) (25) Total cash interest 16,607 13,104 13,874 Amortization of deferred financing costs 635 634 1,105 Amortization of interest rate swap losses 353 29 167 Interest accretion on other liabilities 2 2 2 Total interest expense, net $ 17,597 $ 13,769 $ 15,148 Interest expense, net increased during 2023 primarily due to increased average borrowings and higher average interest rates, partially offset by receipts from our interest rate swaps.
Interest expense, net consisted of the following: Fiscal Year Ended December 25, 2024 December 27, 2023 December 28, 2022 (In thousands) Interest on credit facilities $ 20,124 $ 18,929 $ 8,478 Interest on interest rate swaps (5,916) (5,028) 1,310 Interest on finance lease liabilities 1,990 2,139 2,350 Letters of credit and other fees 619 738 1,053 Interest income (241) (171) (87) Total cash interest 16,576 16,607 13,104 Amortization of deferred financing costs 636 635 634 Amortization of interest rate swap losses 760 353 29 Interest accretion on other liabilities 2 2 2 Total interest expense, net $ 17,974 $ 17,597 $ 13,769 30 Interest expense, net increased during 2024 and 2023 primarily due to increased average borrowings and higher average interest rates, partially offset by receipts from our interest rate swaps.
As a result, costs of franchise and license revenue as a percentage of franchise and license revenue increased to 52.7% for 2022 from 48.9% in 2021. 27 Other Operating Costs and Expenses Other operating costs and expenses such as general and administrative expenses and depreciation and amortization expense relate to both company and franchise operations.
As a result, costs of franchise and license revenue as a percentage of franchise and license revenue decreased to 49.3% for 2023 from 52.7% in 2022. Other Operating Costs and Expenses Other operating costs and expenses such as general and administrative expenses and depreciation and amortization expense relate to both company and franchise operations.
Changes in deferred compensation valuation adjustments have offsetting gains or losses on the underlying nonqualified deferred plan investments included as a component of other nonoperating expense (income), net, for the corresponding periods.
The changes in incentive compensation for both periods primarily resulted from our performance against plan metrics. Changes in deferred compensation valuation adjustments have offsetting gains or losses on the underlying nonqualified deferred plan investments included as a component of other nonoperating expense (income), net, for the corresponding periods.
Restructuring charges and exit costs consisted of the following: Fiscal Year Ended December 27, 2023 December 28, 2022 December 29, 2021 (In thousands) Exit costs $ 190 $ 86 $ 323 Severance and other restructuring charges 2,346 1,324 952 Total restructuring and exit costs $ 2,536 $ 1,410 $ 1,275 Total restructuring and exit costs for 2023 and 2022 primarily consisted of severance costs.
Restructuring charges and exit costs consisted of the following: Fiscal Year Ended December 25, 2024 December 27, 2023 December 28, 2022 (In thousands) Exit costs $ 307 $ 190 $ 86 Severance and other restructuring charges 1,012 2,346 1,324 Total restructuring and exit costs $ 1,319 $ 2,536 $ 1,410 Total restructuring and exit costs for 2024, 2023 and 2022 primarily consisted of severance costs.
Our principal capital requirements have been largely associated with the following: Fiscal Year Ended December 27, 2023 December 28, 2022 December 29, 2021 (In thousands) Facilities $ 4,378 $ 4,596 $ 3,206 New construction 3,782 91 — Remodeling 394 3,846 1,477 Information technology 827 2,638 1,410 Other 597 673 1,262 Capital expenditures (excluding acquisitions) $ 9,978 $ 11,844 $ 7,355 Cash flows used in financing activities were $63.2 million for the year ended December 27, 2023, which included cash payments for stock repurchases of $52.1 million, net debt payments of $7.8 million and payments of tax withholding on share-based compensation of $3.0 million.
Our principal capital requirements have been largely associated with the following: Fiscal Year Ended December 25, 2024 December 27, 2023 December 28, 2022 (In thousands) Facilities $ 7,471 $ 4,378 $ 4,596 New construction 14,970 3,782 91 Remodeling 3,420 394 3,846 Information technology 1,700 827 2,638 Other 1,008 597 673 Capital expenditures (excluding acquisitions) $ 28,569 $ 9,978 $ 11,844 Cash flows used in financing activities were $6.0 million for the year ended December 25, 2024, which included cash payments for stock repurchases of $11.7 million and payments of tax withholding on share-based compensation of $1.9 million, partially offset by net debt borrowings of $4.4 million and net bank overdrafts of $3.2 million.
At December 27, 2023, the Denny’s brand consisted of 1,573 franchised, licensed and company restaurants. Of this amount, 1,508 of Denny’s restaurants were franchised or licensed, representing 96% of the total restaurants, and 65 were company restaurants. We acquired Keke's on July 20, 2022.
At December 25, 2024, the Denny’s brand consisted of 1,499 franchised, licensed and company restaurants. Of this amount, 1,438 of Denny’s restaurants were franchised or licensed, representing 96% of the total restaurants, and 61 were company restaurants. We acquired Keke's on July 20, 2022.
In addition, a 0.4 percentage point increase in workers’ compensation costs was partially offset by a 0.4 percentage point decrease in group insurance costs. Occupancy costs as a percentage of company restaurant sales were 7.9% in 2023, 7.6% in 2022 and 6.7% in 2021.
The 2023 decrease was partially offset by a 0.5 percentage point increase in workers’ compensation costs. Occupancy costs as a percentage of company restaurant sales were 8.6% in 2024, 7.8% in 2023 and 7.6% in 2022.
Advertising revenue increased $6.0 million, or 8.5%, in 2022 primarily resulting from the increase in domestic franchise same-store sales. Initial and other fees decreased $14.4 million, or 50.9%, in 2023 primarily resulting from a decrease in revenue from the sale of equipment to franchisees, as our kitchen modernization program was completed in 2023.
Initial and other fees decreased $14.4 million, or 50.9%, in 2023 primarily resulting from a decrease in revenue from the sale of equipment to franchisees, as our kitchen modernization program was completed in 2023.
General and administrative expenses consisted of the following: Fiscal Year Ended December 27, 2023 December 28, 2022 December 29, 2021 (In thousands) Corporate administrative expenses $ 60,339 $ 52,115 $ 44,367 Share-based compensation 8,880 11,400 13,602 Incentive compensation 6,640 5,811 8,628 Deferred compensation valuation adjustments 1,911 (2,153) 2,089 Total general and administrative expenses $ 77,770 $ 67,173 $ 68,686 Total general and administrative expenses increased by $10.6 million, or 15.8%, in 2023 and decreased by $1.5 million, or 2.2%, in 2022.
General and administrative expenses consisted of the following: Fiscal Year Ended December 25, 2024 December 27, 2023 December 28, 2022 (In thousands) Corporate administrative expenses $ 62,347 $ 60,339 $ 52,115 Share-based compensation 10,678 8,880 11,400 Incentive compensation 5,459 6,640 5,811 Deferred compensation valuation adjustments 1,713 1,911 (2,153) Total general and administrative expenses $ 80,197 $ 77,770 $ 67,173 Total general and administrative expenses increased by $2.4 million, or 3.1%, in 2024 and increased by $10.6 million, or 15.8%, in 2023.
The increase in sales in 2022 includes $6.2 million from Keke’s. Total costs of company restaurant sales as a percentage of company restaurant sales were 87.0% in 2023, 89.8% in 2022 and 84.0% in 2021 consisting of the following: Product costs as a percentage of company restaurant sales were 25.9% in 2023, 26.8% in 2022 and 24.6% in 2021.
Total costs of company restaurant sales as a percentage of company restaurant sales were 89.6% in 2024, 87.0% in 2023 and 89.8% in 2022 consisting of the following: Product costs as a percentage of company restaurant sales were 25.5% in 2024, 25.9% in 2023 and 26.8% in 2022.
T he fair value of the reporting unit's goodwill is sensitive to differences between estimated and actual cash flows, including changes in the projected revenue, projected operating margins, discount rate and the selection of market multiples used to evaluate the fair value of the reporting unit.
No impairment charges related to goodwill were recorded for the year ended December 28, 2022. The fair value of the reporting unit's goodwill is sensitive to differences between estimated and actual cash flows, including changes in the projected revenue, projected operating margins, discount rate and the selection of market multiples used to evaluate the fair value of the reporting unit.
These balances resulted in unused commitments of $133.0 million as of December 27, 2023 under the credit facility. 31 As of December 27, 2023, borrowings under the credit facility bore interest at a rate of Adjusted Daily Simple SOFR plus 2.00%. Letters of credit under the credit facility bore interest at a rate of 2.13%.
These balances resulted in unused commitments of $122.6 million as of December 25, 2024 under the credit facility. 32 As of December 25, 2024, borrowings under the credit facility bore interest at a rate of Adjusted Daily Simple SOFR plus 2.25%. Letters of credit under the credit facility bore interest at a rate of 2.38%.
Events and conditions that could indicate impairment include a sustained drop in the market price of our common stock, increased competition or loss of market share, changes to restaurant development strategies, or changes in general economic conditions. For the year ended December 27, 2023, we recorded goodwill impairment charges related to Keke’s of $6.4 million.
Events and conditions that could indicate impairment include a sustained drop in the market price of our common stock, increased competition or loss of market share, changes to restaurant development strategies, or changes in general economic conditions.
Corporate administrative expenses increased by $8.2 million in 2023 and increased by $7.7 million in 2022. The 2023 increase was primarily due to compensation increases and administrative costs related to Keke’s.
Corporate administrative expenses increased by $2.0 million in 2024 and increased by $8.2 million in 2023. The 2024 increase was primarily due to compensation increases and software subscription costs. The 2023 increase was primarily due to compensation increases and administrative costs related to Keke’s. Share-based compensation increased by $1.8 million in 2024 and decreased by $2.5 million in 2023.
Operating income was $52.8 million in 2023, $60.6 million in 2022 and $104.1 million in 2021.
Operating income was $45.3 million in 2024, $52.8 million in 2023 and $60.6 million in 2022.
Packaging costs and delivery fees (included as a component of other operating expenses) also fluctuate with changes in delivery and off-premises sales. Our fiscal year ends on the last Wednesday in December. As a result, a fifty-third week is added to a fiscal year every five or six years. Fiscal 2023, 2022 and 2021 each included 52 weeks of operations.
Our fiscal year ends on the last Wednesday in December. As a result, a fifty-third week is added to a fiscal year every five or six years. Fiscal 2024, 2023 and 2022 each included 52 weeks of operations.
We perform our annual goodwill impairment test as of the end of each fiscal year, or more frequently if events and circumstances indicate that the asset might be impaired, at the reporting unit level.
See Note 2 and Note 14 to our consolidated financial statements for further discussion of our policies regarding impairment of long-lived assets. Impairment of Goodwill. We perform our annual goodwill impairment test as of the end of each fiscal year, or more frequently if events and circumstances indicate that the asset might be impaired, at the reporting unit level.
All other percentages are as a percentage of total operating revenue. 24 Statistical Data Fiscal Year Ended December 27, 2023 December 28, 2022 December 29, 2021 (Dollars in thousands) Denny’s Company average unit sales $3,073 $2,985 $2,709 Franchise average unit sales $1,843 $1,729 $1,597 Company equivalent units (a) 65 65 65 Franchise equivalent units (a) 1,522 1,561 1,581 Company same-store sales increase vs. prior year (b)(c) 2.7% 10.4% 55.3% Domestic franchised same-store sales increase vs. prior year (b)(c) 3.6% 6.0% 40.1% Keke’s (d) Company average unit sales $1,796 $772 N/A Franchise average unit sales $1,828 $802 N/A Company equivalent units (a) 8 4 N/A Franchise equivalent units (a) 48 20 N/A Company same-store sales decrease (b) (1.1)% N/A N/A Franchise same-store sales decrease (b) (4.4)% N/A N/A (a) Equivalent units are calculated as the weighted average number of units outstanding during a defined time period.
These reclassifications did not affect total revenues or net income. 25 Statistical Data Fiscal Year Ended December 25, 2024 December 27, 2023 December 28, 2022 (Dollars in thousands) Denny’s Company average unit sales $3,086 $3,073 $2,985 Franchise average unit sales $1,875 $1,843 $1,729 Company equivalent units (a) 62 65 65 Franchise equivalent units (a) 1,478 1,522 1,561 Company same-restaurant sales increase vs. prior year (b)(c) (1.5)% 2.7% 10.4% Domestic franchised same-restaurant sales increase vs. prior year (b)(c) (0.1)% 3.6% 6.0% Keke’s (d) Company average unit sales $1,728 $1,796 $772 Franchise average unit sales $1,829 $1,828 $802 Company equivalent units (a) 11 8 4 Franchise equivalent units (a) 50 48 20 Company same-restaurant sales decrease (b) (2.7)% (1.1)% N/A Franchise same-restaurant sales decrease (b) (1.6)% (4.4)% N/A (a) Equivalent units are calculated as the weighted average number of units outstanding during a defined time period.
For 2022, the difference in the overall effective rate from the U.S. statutory rate was primarily due to state and foreign taxes, partially offset by the generation of employment and foreign tax credits.
For 2022, the difference in the overall effective rate from the U.S. statutory rate was primarily due to state and foreign taxes, partially offset by the generation of employment and foreign tax credits. For additional details related to the provision for income taxes as well as changes in the effective tax rate, see Note 15 to our consolidated financial statements.
Net cash flow used in investing activities were $86.6 million for the year ended December 28, 2022. These cash flows included $82.5 million for the acquisition of Keke’s and capital expenditures of $11.8 million, partially offset by proceeds from the sale of real estate and other assets of $4.1 million and collections on real estate acquisitions of $3.6 million.
These cash flows included capital expenditures of $28.6 million and investment purchases of $1.5 million, partially offset by net proceeds from the sale of real estate and restaurants for $1.4 million and net investment proceeds of $1.8 million. Net cash flows used in investing activities were $7.6 million for the year ended December 27, 2023.
Unit Activity Fiscal Year Ended December 27, 2023 December 28, 2022 December 29, 2021 Denny’s Company restaurants, beginning of period 66 65 65 Units acquired from franchisees — 1 — Units closed (1) — — End of period 65 66 65 Franchised and licensed restaurants, beginning of period 1,536 1,575 1,585 Units opened 28 28 20 Units acquired by Company — (1) — Units closed (56) (66) (30) End of period 1,508 1,536 1,575 Total restaurants, end of period 1,573 1,602 1,640 25 Fiscal Year Ended December 27, 2023 December 28, 2022 December 29, 2021 Keke’s Company restaurants, beginning of period 8 — — Units acquired — 8 — End of period 8 8 — Franchised and licensed restaurants, beginning of period 46 — — Units opened 4 2 — Units acquired — 44 — End of period 50 46 — Total restaurants, end of period 58 54 — Company Restaurant Operations Company restaurant sales for 2023 increased $15.8 million, or 7.9%, primarily driven by a 2.7% increase in Denny’s company same-store sales and the operation of Keke’s for a full year in 2023.
Unit Activity Fiscal Year Ended December 25, 2024 December 27, 2023 December 28, 2022 Denny’s Company restaurants, beginning of period 65 66 65 Units acquired from franchisees — — 1 Units sold to franchisees (3) — — Units closed (1) (1) — End of period 61 65 66 Franchised and licensed restaurants, beginning of period 1,508 1,536 1,575 Units opened 14 28 28 Units purchased from Company 3 — — Units acquired by Company — — (1) Units closed (87) (56) (66) End of period 1,438 1,508 1,536 Total restaurants, end of period 1,499 1,573 1,602 26 Fiscal Year Ended December 25, 2024 December 27, 2023 December 28, 2022 Keke’s Company restaurants, beginning of period 8 8 — Units opened 7 — — Units acquired — — 8 Units sold to franchisees (1) — — End of period 14 8 8 Franchised and licensed restaurants, beginning of period 50 46 — Units opened 5 4 2 Units purchased from Company 1 — — Units acquired — — 44 Units closed (1) — — End of period 55 50 46 Total restaurants, end of period 69 58 54 Company Restaurant Operations Company restaurant sales for 2024 decreased $3.8 million, or 1.7%, primarily driven by a 1.5% decrease in Denny’s company same-restaurant sales and three less Denny’s equivalent units.
Franchise Operations Franchise and license revenue and costs of franchise and license revenue consisted of the following amounts and percentages of franchise and license revenue for the periods indicated: Fiscal Year Ended December 27, 2023 December 28, 2022 December 29, 2021 (Dollars in thousands) Royalties $ 120,131 48.4 % $ 113,891 44.4 % $ 103,425 46.3 % Advertising revenue 78,494 31.6 % 75,926 29.6 % 69,957 31.3 % Initial and other fees 13,882 5.6 % 28,262 11.0 % 8,009 3.6 % Occupancy revenue 35,883 14.4 % 38,597 15.0 % 41,766 18.7 % Franchise and license revenue $ 248,390 100.0 % $ 256,676 100.0 % $ 223,157 100.0 % Advertising costs $ 78,494 31.6 % $ 75,926 29.6 % $ 69,957 31.3 % Occupancy costs 22,160 8.9 % 24,090 9.4 % 26,237 11.8 % Other direct costs 21,798 8.8 % 35,311 13.8 % 12,946 5.8 % Costs of franchise and license revenue $ 122,452 49.3 % $ 135,327 52.7 % $ 109,140 48.9 % Royalties increased by $6.2 million, or 5.5%, in 2023 primarily resulting from a 3.6% increase in Denny’s domestic franchise same-store sales as compared to the prior year.
Franchise Operations Franchise and license revenue and costs of franchise and license revenue consisted of the following amounts and percentages of franchise and license revenue for the periods indicated: Fiscal Year Ended December 25, 2024 December 27, 2023 December 28, 2022 (Dollars in thousands) Royalties $ 118,705 49.3 % $ 120,131 48.4 % $ 113,891 44.4 % Advertising revenue 79,973 33.2 % 78,494 31.6 % 75,926 29.6 % Initial and other fees 8,711 3.6 % 13,882 5.6 % 28,262 11.0 % Occupancy revenue 33,164 13.8 % 35,883 14.4 % 38,597 15.0 % Franchise and license revenue $ 240,553 100.0 % $ 248,390 100.0 % $ 256,676 100.0 % Advertising costs $ 79,973 33.2 % $ 78,494 31.6 % $ 75,926 29.6 % Occupancy costs 20,539 8.5 % 22,160 8.9 % 24,090 9.4 % Other direct costs 19,714 8.2 % 21,798 8.8 % 35,311 13.8 % Costs of franchise and license revenue $ 120,226 50.0 % $ 122,452 49.3 % $ 135,327 52.7 % Royalties decreased by $1.4 million, or 1.2%, in 2024 primarily resulting from a decrease of 44 Denny’s equivalent units, partially offset by an increase of two Keke’s equivalent units.
Depreciation and amortization consisted of the following: Fiscal Year Ended December 27, 2023 December 28, 2022 December 29, 2021 (In thousands) Depreciation of property and equipment $ 10,720 $ 11,118 $ 11,441 Amortization of finance right-of-use assets 1,451 1,704 1,895 Amortization of intangible and other assets 2,214 2,040 2,110 Total depreciation and amortization expense $ 14,385 $ 14,862 $ 15,446 The decreases in total depreciation and amortization expense during 2023 and 2022 were primarily due to certain assets becoming fully depreciated.
Depreciation and amortization consisted of the following: Fiscal Year Ended December 25, 2024 December 27, 2023 December 28, 2022 (In thousands) Depreciation of property and equipment $ 11,260 $ 10,720 $ 11,118 Amortization of finance right-of-use assets 1,349 1,451 1,704 Amortization of intangible and other assets 2,248 2,214 2,040 Total depreciation and amortization expense $ 14,857 $ 14,385 $ 14,862 The increase in total depreciation and amortization expense during 2024 was primarily related to new Keke’s units.
The increase in Denny’s company same-store sales primarily resulted from price increases to partially offset inflationary pressures. Company restaurant sales from Keke’s increased $8.2 million in 2023. Company restaurant sales for 2022 increased $24.7 million, or 14.1%, primarily driven by a 10.4% increase in Denny’s company same-store sales resulting from price increases to partially offset inflationary costs.
The increase in Denny’s company same-restaurant sales primarily resulted from price increases to partially offset inflationary pressures. Company restaurant sales from Keke’s increased $8.2 million in 2023.
Factors Impacting Comparability For 2023, 2022 and 2021, the following items impacted the comparability of our results: • Company restaurant sales increased from $175.0 million in 2021 to $199.8 million in 2022 and $215.5 million in 2023, primarily from our progressive recovery from the COVID-19 pandemic that began in 2020 and the acquisition of Keke’s in 2022. 22 • Royalty income, which is included as a component of franchise and license revenue, increased from $103.4 million in 2021 to $113.9 million in 2022 and $120.1 million in 2023, also related to our recovery from the COVID-19 pandemic and the acquisition of Keke’s in 2022. • Initial and other fees increased from $8.0 million in 2021 to $28.3 million in 2022 and decreased to $13.9 million in 2023.
Our next 53-week year will be fiscal 2025. 23 Factors Impacting Comparability For 2024, 2023 and 2022, the following items impacted the comparability of our results: • Company restaurant sales increased from $199.8 million in 2022 to $215.5 million in 2023, primarily due to the acquisition of Keke’s in 2022, and decreased to $211.8 million in 2024, primarily due to a decrease in same-restaurant sales in 2024. • Royalty income, which is included as a component of franchise and license revenue, increased from $113.9 million in 2022 to $120.1 million in 2023, primarily due to the acquisition of Keke’s in 2022, and decreased to $118.7 million in 2024, primarily due to a decrease in Denny’s equivalent units and same-restaurant sales in 2024. • Initial and other fees, which is included as a component of franchise and license revenue, decreased from $28.3 million in 2022 to $13.9 million in 2023 and $8.7 million in 2024.
Other direct costs decreased $13.5 million, or 38.3%, primarily due to the completion of our kitchen modernization program at franchise restaurants as mentioned above. As a result, costs of franchise and license revenue as a percentage of franchise and license revenue decreased to 49.3% for 2023 from 52.7% in 2022.
Occupancy costs decreased $1.9 million, or 8.0%, in 2023, primarily related to lease terminations. Other direct costs decreased $13.5 million, or 38.3%, primarily due to the completion of our kitchen modernization program at franchise restaurants as mentioned above.
Other operating expenses consisted of the following amounts and percentages of company restaurant sales: Fiscal Year Ended December 27, 2023 December 28, 2022 December 29, 2021 (Dollars in thousands) Utilities $ 7,848 3.6 % $ 7,273 3.6 % $ 5,814 3.3 % Repairs and maintenance 3,661 1.7 % 3,874 1.9 % 2,743 1.6 % Marketing 5,603 2.6 % 5,294 2.7 % 4,594 2.6 % Legal settlements 2,302 1.1 % 4,224 2.1 % 2,134 1.2 % Other direct costs 14,650 6.8 % 13,610 6.8 % 11,666 6.7 % Other operating expenses $ 34,064 15.8 % $ 34,275 17.2 % $ 26,951 15.4 % 26 For 2023, legal settlement costs were lower as a percentage of sales primarily due to unfavorable developments in certain claims during the prior year.
Other operating expenses consisted of the following amounts and percentages of company restaurant sales: 27 Fiscal Year Ended December 25, 2024 December 27, 2023 December 28, 2022 (Dollars in thousands) Utilities $ 6,954 3.3 % $ 7,848 3.6 % $ 7,273 3.6 % Repairs and maintenance 4,023 1.9 % 3,661 1.7 % 3,874 1.9 % Marketing 7,850 3.7 % 5,603 2.6 % 5,294 2.7 % Legal settlements 1,700 0.8 % 2,302 1.1 % 4,224 2.1 % Pre-opening costs 1,548 0.7 % 288 0.1 % — — % Other direct costs 15,004 7.1 % 14,633 6.8 % 13,610 6.8 % Other operating expenses $ 37,079 17.5 % $ 34,335 15.9 % $ 34,275 17.2 % For 2024, the increase in other operating expenses was primarily due to increased marketing and increased pre-opening costs.
In addition, investments in general and administrative expenses to support the growth of the brand and an extended development cycle have also impacted near-term cash flow projections. 28 Operating (gains), losses and other charges, net consisted of the following: Fiscal Year Ended December 27, 2023 December 28, 2022 December 29, 2021 (In thousands) Gains on sales of assets and other, net $ (2,220) $ (3,378) $ (47,822) Restructuring charges and exit costs 2,536 1,410 1,275 Impairment charges (1) 2,214 963 442 Operating (gains), losses and other charges, net $ 2,530 $ (1,005) $ (46,105) (1) Impairment charges include impairments related to property, operating right-of-use assets, finance right-of-use assets, and reacquired franchise rights.
Operating (gains), losses and other charges, net consisted of the following: Fiscal Year Ended December 25, 2024 December 27, 2023 December 28, 2022 (In thousands) Gains on sales of assets and other, net $ (137) $ (2,220) $ (3,378) Impairment charges (1) 792 2,214 963 Restructuring and exit costs 1,319 2,536 1,410 Operating (gains), losses and other charges, net $ 1,974 $ 2,530 $ (1,005) (1) Impairment charges include impairments related to property, operating lease right-of-use assets, finance lease right-of-use assets, franchise agreements, and reacquired franchise rights.
The volatility of payroll and benefit costs results primarily from changes in wage rates and increases in labor related expenses, such as medical benefit costs and workers’ compensation costs. Additionally, changes in guest counts and investments in store-level labor impact payroll and benefit costs as a percentage of sales.
Costs of company restaurant sales are exposed to volatility in two main areas: payroll and benefit costs and product costs. The volatility of payroll and benefit costs results primarily from changes in wage rates and increases in labor related expenses, such as medical benefit costs and workers’ compensation costs.
For additional details related to the provision for income taxes as well as changes in the effective tax rate, see Note 15 to our Consolidated Financial Statements. Net income was $19.9 million for 2023, $74.7 million for 2022 and $78.1 million for 2021.
For additional details related to the interest rate swaps, see Note 10 to our consolidated financial statements. The provision for income taxes was $7.7 million for 2024, $7.0 million for 2023 and $24.7 million for 2022. The effective tax rate was 26.3% for 2024, 26.0% for 2023 and 24.9% for 2022.
These cash flows were primarily proceeds from the sale of real estate and other assets of $50.1 million, partially offset by acquisition of restaurants and real estate of $10.4 million, capital expenditures of $7.4 million and deposits on real estate acquisitions of $3.6 million.
These cash flows included $82.5 million for the acquisition of Keke’s and capital expenditures of $11.8 million, partially offset by proceeds from the sale of real estate and other assets of $4.1 million and the collection of a real estate acquisition deposit of $3.6 million.
In 2022, royalties increased by $10.5 million, or 10.1% primarily resulting from a 6.0% increase in Denny’s domestic franchise same-store sales as compared to the prior year. The increase in royalties included $2.2 million from Keke’s. The average domestic contractual royalty rate was 4.42%, 4.39% and 4.35% for 2023, 2022 and 2021, respectively.
In 2023, royalties increased by $6.2 million, or 5.5%, primarily resulting from a 3.6% increase in Denny’s domestic franchise same-restaurant sales as compared to the prior year. Royalties from Keke’s franchise restaurants increased $3.0 million as a result of operating for a full year in 2023.
Incentive compensation increased by $0.8 million in 2023 and decreased by $2.8 million in 2022. The changes in incentive compensation for both periods primarily resulted from our performance against plan metrics.
The 2024 increase was primarily due to our performance against plan metrics and prior year forfeitures. The 2023 decrease was primarily due to forfeitures and our performance against plan metrics. Incentive compensation decreased by $1.2 million in 2024 and increased by $0.8 million in 2023.
We performed an annual impairment test of goodwill and other intangible assets with indefinite lives as of December 27, 2023 and determined that a portion of the goodwill related to Keke’s was impaired as a result of lower than forecasted near-term sales and cash flows as well as higher discount rates post-acquisition that were used to determine the fair value of goodwill.
We performed an annual impairment test of goodwill and other intangible assets with indefinite lives as of December 27, 2023 and determined that a portion of the goodwill related to Keke’s was impaired. As a result, we recorded $6.4 million of goodwill impairment charges in 2023. See Note 6.
Net cash flows provided by investing activities were $29.0 million for the year ended December 29, 2021.
Net cash flows used in investing activities were $86.6 million for the year ended December 28, 2022.
Liquidity and Capital Resources Summary of Cash Flows Our primary sources of liquidity and capital resources are cash generated from operations and borrowings under our credit facility (as described below). Principal uses of cash are operating expenses, acquisitions and capital expenditures and the repurchase of shares of our common stock.
Principal uses of cash are operating expenses, acquisitions and capital expenditures and the repurchase of shares of our common stock.
Costs of franchise and license revenue increased $26.2 million, or 24.0%, in 2022. Advertising costs increased $6.0 million, or 8.5%, which corresponds to the related advertising revenue increases noted above. Occupancy costs decreased $2.1 million, or 8.2%, in 2022, primarily related to lease terminations.
As a result, costs of franchise and license revenue as a percentage of franchise and license revenue increased to 50.0% for 2024 from 49.3% in 2023. Costs of franchise and license revenue decreased $12.9 million, or 9.5%, in 2023. Advertising costs increased $2.6 million, or 3.4%, which corresponds to the related advertising revenue increases noted above.
As of December 27, 2023, the Keke’s brand consisted of 58 franchised and company restaurants in Florida. Of this amount, 50 Keke’s restaurants were franchised, representing 86% of total Keke’s restaurants, and eight were company restaurants.
As of December 25, 2024, the Keke’s brand consisted of 69 franchised and company restaurants in six states with principal concentration in Florida (88% of total restaurants). Of this amount, 55 Keke’s restaurants were franchised, representing 80% of total Keke’s restaurants, and 14 were company restaurants.
Net cash flows provided by operating activities were $39.5 million for the year ended December 28, 2022 compared to net cash flows provided by operating activities of $76.2 million for the year ended December 29, 2021.
The decrease in cash flows provided by operating activities was primarily due to decreases in operating income, accounts payable, and other accrued liabilities. Net cash flows provided by operating activities were $72.1 million for the year ended December 27, 2023 compared to net cash flows provided by operating activities of $39.5 million for the year ended December 28, 2022.
Cash flows used in financing activities were $78.5 million for the year ended December 29, 2021, which included net debt repayments of $42.1 million, cash payments for stock repurchases of $30.0 million, net bank overdraft payments of $3.1 million, and deferred financing costs of $1.9 million.
Cash flows used in financing activities were $63.2 million for the year ended December 27, 2023, which included cash payments for stock repurchases of $52.1 million, net debt payments of $7.8 million and payments of tax withholding on share-based compensation of $3.0 million.
Many of the products sold in our restaurants are affected by commodity pricing and are, therefore, subject to price volatility. This volatility is caused by factors that are fundamentally outside of our control and are often unpredictable. In general, we purchase food products based on market prices or we set firm prices in purchase agreements with our vendors.
Additionally, changes in guest counts and investments in store-level labor impact payroll and benefit costs as a percentage of sales. Many of the products sold in our restaurants are affected by commodity pricing and are, therefore, subject to price volatility. This volatility is caused by factors that are fundamentally outside of our control and are often unpredictable.
Gains on sales of assets and other, net for 2023, 2022, and 2021 were primarily related to the sales of real estate.
Gains on sales of assets and other, net for 2024, 2023, and 2022 were primarily related to the sales of real estate and restaurants. Impairment charges of $0.8 million, $2.2 million and $1.0 million for 2024, 2023 and 2022, respectively, primarily related to assets held for sale and resulting from our assessments of underperforming and closed restaurants.
Impairment charges of $2.2 million, $1.0 million and $0.4 million for the years ended December 27, 2023, December 28, 2022 and December 29, 2021, respectively, primarily resulted from our assessment of underperforming restaurants. See Note 2 and Note 14 to our Consolidated Financial Statements for further discussion of our policies regarding impairment of long-lived assets. Impairment of Goodwill.
Impairment charges of $0.8 million, $2.2 million and $1.0 million for the years ended December 25, 2024, December 27, 2023 and December 28, 2022, respectively, primarily related to assets held for sale and resulting from our assessments of underperforming restaurants and closed restaurants.
Our working capital deficit was $59.3 million at December 27, 2023 compared with $43.3 million at December 28, 2022, primarily due to a decrease in receivables and inventories related to our franchise equipment projects in 2023.
Our working capital deficit was $55.6 million at December 25, 2024 compared with $59.3 million at December 27, 2023, primarily due to a decrease in accounts payable and other accrued liabilities, partially offset by a decrease in current assets.
In an inflationary commodity environment, our ability to lock in prices on certain key commodities is imperative to controlling food costs. In addition, our continued success with menu management helps us offer menu items that provide a compelling value to our customers while maintaining attractive product costs and profitability.
In addition, our continued success with menu management helps us offer menu items that provide a compelling value to our customers while maintaining attractive product costs and profitability. Packaging costs (included as a component of product costs) and delivery fees (included as a component of other operating expenses) also fluctuate with changes in delivery and off-premises sales.
Initial and other fees increased $20.3 million, or 252.9%, in 2022 primarily resulting from the recognition of $19.1 million of revenue from the sale and installation of kitchen equipment at franchise restaurants. Occupancy revenue decreased $2.7 million, or 7.0%, in 2023 primarily due to lease terminations. Occupancy revenue decreased $3.2 million, or 7.6%, in 2022 primarily due to lease terminations.
Occupancy costs decreased $1.6 million, or 7.3%, in 2024, primarily related to lease terminations. Other direct costs decreased $2.1 million, or 9.6%, primarily due to the completion of our kitchen modernization program at franchise restaurants as mentioned above.
Contractual Obligations Our future contractual obligations and commitments at December 27, 2023 consisted of the following: Payments Due by Period Total Less than 1 Year 1-2 Years 3-4 Years 5 Years and Thereafter (In thousands) Long-term debt (a) $ 255,500 $ — $ 255,500 $ — $ — Finance lease obligations (b)(c) 23,368 3,312 5,991 4,136 9,929 Operating lease obligations (b) 167,787 21,977 41,424 35,097 69,289 Interest obligations (c) 33,910 12,538 21,372 — — Defined benefit plan obligations (d) 1,205 582 230 159 234 Purchase obligations (e) 202,018 202,018 — — — Unrecognized tax benefits (f) 445 — — — — Total $ 684,233 $ 240,427 $ 324,517 $ 39,392 $ 79,452 (a) Refer to Note 10 to our Consolidated Financial Statements for a further discussion of our long-term debt and timing of expected payments.
Contractual Obligations Our future contractual obligations and commitments at December 25, 2024 consisted of the following: Payments Due by Period Total Less than 1 Year 1-2 Years 3-4 Years 5 Years and Thereafter (In thousands) Long-term debt (a) $ 261,300 $ — $ 261,300 $ — $ — Finance lease obligations (b)(c) 22,211 3,077 5,624 3,704 9,806 Operating lease obligations (b) 179,876 23,243 44,442 37,433 74,758 Interest obligations (c) 23,004 13,724 9,280 — — Defined benefit plan obligations (d) 590 105 185 184 116 Purchase obligations (e) 195,923 195,923 — — — Unrecognized tax benefits (f) 458 — — — — Total $ 683,362 $ 236,072 $ 320,831 $ 41,321 $ 84,680 (a) Refer to Note 10 to our consolidated financial statements for a further discussion of our long-term debt and timing of expected payments.
Interest expense, net decreased during 2022 primarily due to decreased deferred financing cost amortization and decreased financing lease interest. 29 Other nonoperating expense (income), net was expense of $8.3 million, income of $52.6 million and income of $15.2 million for 2023, 2022 and 2021, respectively.
Other nonoperating expense (income), net was income of $1.9 million, expense of $8.3 million and income of $52.6 million for 2024, 2023 and 2022, respectively. Nonoperating income for 2024 includes $1.7 million of gains on deferred compensation investments.
Royalties from Keke’s franchise restaurants increased $3.0 million as a result of operating for a full year in 2023. The 2023 increase was partially offset by a decrease of 39 Denny’s franchise equivalent units.
The decrease in company restaurant sales was partially offset by three additional Keke’s equivalent units. Company restaurant sales for 2023 increased $15.8 million, or 7.9%, primarily driven by a 2.7% increase in Denny’s company same-restaurant sales and the operation of Keke’s for a full year in 2023.
The credit facility also includes certain financial covenants with respect to a maximum consolidated leverage ratio and a minimum consolidated fixed charge coverage ratio. We were in compliance with all financial covenants as of December 27, 2023.
The credit facility also contains certain financial covenants, including a maximum consolidated leverage ratio of 4.0 times and a minimum consolidated fixed charge coverage ratio of 1.5 times. As of December 25, 2024, our consolidated leverage ratio was 3.85 times and our consolidated fixed charge coverage ratio was 2.18 times.
The 2023 decrease was partially offset by a 0.5 percentage point increase in workers’ compensation costs. The 2022 increase as a percentage of sales was primarily due to a 0.9 percentage point increase in team labor due to higher wage rates.
The 2024 increase as a percentage of sales was primarily due to a 0.2 percentage point increase in group insurance costs, 0.2 percentage point increase in management labor, 0.1 percentage point increase in incentive compensation and a 0.1 percentage point increase in payroll taxes and fringe benefits.
As of December 27, 2023, we had outstanding revolver loans of $255.5 million and outstanding letters of credit under the credit facility of $11.5 million.
We were in compliance with all financial covenants as of December 25, 2024, and we expect to remain in compliance throughout 2025. As of December 25, 2024, we had outstanding revolver loans of $261.3 million and outstanding letters of credit under the credit facility of $16.1 million.
Costs of franchise and license revenue percentages are as a percentage of franchise and license revenue.
Costs of franchise and license revenue percentages are as a percentage of franchise and license revenue. All other percentages are as a percentage of total operating revenue. (b) Certain reclassifications have been made in the 2023 presentation to conform to the 2024 presentation.
Occupancy revenue has decreased from $41.8 million in 2021 to $35.9 million in 2023 primarily as a result of lease expirations. At the end of 2023, we had 195 franchised restaurants that were leased or subleased from Denny’s, compared to 246 at the end of 2021. • Information discussed in Item 7.
Occupancy revenue has decreased from $38.6 million in 2022 to $35.9 million in 2023 and $33.2 million in 2024 primarily as a result of lease expirations.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeA summary of our interest rate swaps as of December 27, 2023 is as follows: Trade Date Effective Date Maturity Date Notional Amount Fair Value Fixed Rate (In thousands) Swaps designated as cash flow hedges March 20, 2015 March 29, 2018 March 31, 2025 $ 120,000 $ 3,162 2.34 % October 1, 2015 March 29, 2018 March 31, 2026 $ 50,000 $ 1,680 2.37 % February 15, 2018 March 31, 2020 December 31, 2033 $ 37,000 (1) $ 4,046 3.09 % Total $ 207,000 $ 8,888 (1) The notional amounts of the swaps entered into on February 15, 2018 increase periodically until they reach the maximum notional amount of $335 million on August 31, 2033. 34 On March 31, 2023, the Company entered into an amendment of its interest rate swaps.
Biggest changeA summary of our interest rate swaps as of December 25, 2024 is as follows: Trade Date Effective Date Maturity Date Notional Amount Fair Value Fixed Rate (In thousands) Swaps designated as cash flow hedges March 20, 2015 March 29, 2018 March 31, 2025 $ 120,000 $ 618 2.34 % October 1, 2015 March 29, 2018 March 31, 2026 $ 50,000 $ 1,087 2.37 % February 15, 2018 March 31, 2020 December 31, 2033 $ 68,000 (1) $ 19,136 3.09 % Total $ 238,000 $ 20,841 (1) The notional amounts of the swaps entered into on February 15, 2018 will increase by $120 million on March 31, 2025 when the swaps entered into on March 20, 2015 expire and will increase periodically until they reach the maximum notional amount of $335 million on August 31, 2033. 35 As of December 25, 2024, our swaps effectively increase our ratio of fixed rate debt from 4% of total debt to 91% of total debt.
Because of the often short-term nature of commodity pricing aberrations and our ability to change menu pricing or manage the menu in response to commodity price increases, we believe that the impact of commodity price risk is not significant.
Because of the often short-term nature of commodity pricing aberrations and our ability to change menu pricing or manage the menu in response to commodity price increases, we believe that, in most cases, the impact of commodity price risk is not significant.
This computation is determined by considering the impact of hypothetical interest rates on the credit facility at December 27, 2023, taking into consideration the interest rate swaps that will be in effect during the next 12 months. However, the nature and amount of our borrowings may vary as a result of future business requirements, market conditions and other factors.
This computation is determined by considering the impact of hypothetical interest rates on the credit facility at December 25, 2024, taking into consideration the interest rate swaps that will be in effect during the next 12 months. However, the nature and amount of our borrowings may vary as a result of future business requirements, market conditions and other factors.
For additional information related to our interest rate swaps, including changes in the fair value, refer to Notes 8, 10 and 18 to our Consolidated Financial Statements.
For additional information related to our interest rate swaps, including changes in the fair value, refer to Notes 8, 10 and 17 to our consolidated financial statements.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk Interest Rate Risk We have exposure to interest rate risk related to certain instruments entered into for other than trading purposes. Specifically, as of December 27, 2023, borrowings under our credit facility bore interest at variable rates based on Adjusted Daily Simple SOFR plus 2.00% per annum.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk Interest Rate Risk We have exposure to interest rate risk related to certain instruments entered into for other than trading purposes. Specifically, as of December 25, 2024, borrowings under our credit facility bore interest at variable rates based on Adjusted Daily Simple SOFR plus 2.25% per annum.
Based on the levels of borrowings under the credit facility as of December 27, 2023, if interest rates changed by 100 basis points, our annual cash flow and income before taxes would change by $0.3 million.
Based on the levels of borrowings under the credit facility as of December 25, 2024, if interest rates changed by 100 basis points, our annual cash flow and income before taxes would change by $0.2 million.
Commodity Price Risk We purchase certain food products, such as beef, poultry, pork, eggs and coffee, and utilities such as gas and electricity, that are affected by commodity pricing and are, therefore, subject to price volatility caused by weather, production problems, delivery difficulties and other factors that are outside our control and which are generally unpredictable.
Commodity Price Risk We purchase certain food products, such as beef, poultry, pork, eggs and coffee, and utilities such as gas and electricity, that are affected by commodity pricing and are, therefore, subject to price volatility caused by weather, production problems, delivery difficulties, impacts on animals, including avian flu, tariffs and uncertainty regarding future tariffs, and other factors that are outside our control and which are generally unpredictable.
In many cases, we believe we will be able to address commodity cost increases which are significant and appear to be long-term in nature by adjusting our menu pricing or managing the menu. However, competitive circumstances could limit such actions and, in those circumstances, increases in commodity prices could lower our margins.
However, these arrangements can be impacted in extreme situations. In many cases, we believe we will be able to address commodity cost increases which are significant and appear to be long-term in nature by adjusting our menu pricing or managing the menu.
We have established a process to identify, control and manage market risks which may arise from changes in interest rates, commodity prices and other relevant rates and prices. We do not use derivative instruments for trading purposes.
However, extreme situations and competitive circumstances could limit such actions and, in those circumstances, increases in commodity prices could lower our margins and impact the profitability of our franchisees. We have established a process to identify, control and manage market risks which may arise from changes in interest rates, commodity prices and other relevant rates and prices.
Removed
The amendment transitions our interest rate swap benchmark interest rates from LIBOR to Daily Simple SOFR, and as such the fixed rates in the table above have been adjusted to the appropriate fixed rates. The conversion to Daily Simple SOFR did not have a material impact on the Company’s consolidated financial position or results of operation.
Added
We do not use derivative instruments for trading purposes.
Removed
As of December 27, 2023, our swaps effectively increase our ratio of fixed rate debt from 4% of total debt to 82% of total debt.

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