Denny's
Formerly known as DFO (Designer Fashion Outlet)
Bottom line
- Total investment $255K – $3.1M including a $30K franchise fee, 4.5% ongoing royalty.
- Average unit revenue of $1.9M/year (median $1.8M). Estimated payback in 2.0 years.
- Rated STRONG with a risk score of 48/100. SBA loan default rate of 0.0% across 235 loans (below the industry average).
- System contracting at -7.7% CAGR over 3 years. Investigate whether closures are franchisor-driven (consolidation) or franchisee-driven (economics).
Item 1 · who you're contracting with
The Franchisor
Yale framework · single-unit ROIC
Returns Analysis
Pulls Item 7 (investment) and Item 19 (revenue) from this brand's FDD into the Yale unlevered-ROIC formula. Override any input to stress-test it against your own assumptions.
The model · Yale framework
What would one Denny's unit return on the cash you put in?
Unlevered ROIC · per unit
17%
Below typical band (30–60%)
Levered LBO scenario · Yale Crease Capital framing
What would 25 Denny's units return on equity?
Equity IRR · 5-yr
32.6%
4.10× MOIC
Year-1 DSCR
2.48×
EBITDA ÷ debt service
Equity required
$6.4M
on $16.3M purchase
Total debt
$9.9M
SBA $5.0M + senior + seller note
Overview
About
Denny's franchisees operate full-service casual dining restaurants serving breakfast, lunch, and dinner to families and individual diners. Daily operations include managing kitchen staff, serving customers, handling inventory, maintaining facilities, and ensuring compliance with brand standards across 24-hour or extended-hour operations.
Item 7 · what it costs
The Vitals
Item 19
Financial Performance
Item 20 · unit dynamics
The Growth Chart
Year-over-year franchised unit counts and net change. Source: FDD Item 20.
Item 20 · 8 states with active franchisees
The Territory Map
Derived from franchisee contact records. Shows states with at least one current operator — not where the franchisor is registered to sell new units (that data is re-extracting in a future refresh).
States derived from franchisee phone area codes (Item 20). Approximate — ported numbers may show the original state, not the franchisee's current location.
Government records
SBA Loan Data
Aggregated from SBA 7(a) loan disclosures, public data unique to FranchiseVerdict.
FranchiseVerdict rating + FDD Items 3, 5, 6, 12, 17
Risk & Legal
Denny's presents caution-level risk due to a shrinking franchise system, unresolved litigation over fee disputes, unprotected territories, and lack of earnings transparency.
Score breakdown · what drove the 48 / 100 rating
- 01MINORSystem declining 5.1% YoY (1,334 units) indicates contraction and potential market saturation
- 02HIGHActive litigation involving breach of contract and royalty disputes suggests franchisor relationship issues
- 03MINORUnprotected territory creates direct competition risk from other Denny's franchisees in same area
- 04MINORWide investment range ($255K-$3M+) and royalty spread (4.5%-7%) lacks transparency on cost drivers
- 05MINORNo Item 19 (Financial Performance Representations) provided — earnings claims cannot be independently verified
- 06MINORHigh royalty burden (up to 7%) against modest net income ($845K avg) pressures unit profitability
Severity inferred from the FDD text · not a regulatory classification
FDD Items 5, 6, 12, 17 · continued from Risk & Legal
Contract & Territory Detail
Item 11
Training & Operations
Item 20
Franchisee Contacts
Phone numbers extracted directly from this brand's FDD Item 20. After purchase, you'll also receive a list of validation questions tailored to this brand.
Franchisee contacts
15 numbers
One-time purchase · CSV download · Validation questions included
FDD download
Denny's · FDD (2025) PDF