The Company has completed an extensive review of its organizational structure in comparison with many prominent franchise systems. In April, the Company realigned its senior leadership with three executive officers reporting to the CEO. The Company has restructured the organization under this leadership to effectively execute its new strategic direction with primary emphasis on sales, brand, and franchise.
Additionally, the Company has created four regional vice presidents of operations (RVP) positions that will have accountability for the performance of both company and franchise restaurants within a geographic region. The RVPs and their support teams will manage an integrated effort to drive guest counts, sales, and profitability while ensuring operational excellence. The Company is also strengthening its marketing focus with resources dedicated to sales, consumer insights, innovation, and an enhanced local marketing effort through a strategic collaboration with Denny’s operational leadership.
“Through the success of Denny’s Franchise Growth Initiative (FGI), the mix of franchised restaurants in the Denny’s system is now up to 76 percent. In our quest to become a franchisor-of-choice in the restaurant industry, we must continue to evolve our corporate structure and mission to focus on driving sales, expanding the brand, and providing valuable support to our franchisees. We have determined that to be competitive in today’s challenging operating environment it is necessary to reallocate resources and streamline our structure. We see many opportunities ahead for the Denny’s brand and look forward to working with our franchisees to capitalize on our growth prospects,” states Nelson Marchioli, president and CEO.
The new organizational structure increases brand and franchisee support, but also allows for consolidation of certain departments and job functions resulting in the near-term elimination of approximately 50 positions. As a result of these staff reductions, the Company expects to incur a restructuring charge attributable to severance and other expense of approximately $5 million in the second quarter of 2008, which will be paid out over the next 12 months. Additionally, the Company expects to realize annualized savings of approximately $6 to $8 million in core general and administrative expense (which excludes share-based compensation and annual incentive compensation). This expense reduction will phase in during the second half of 2008.