It is also in the process of merging with Flying J Travel Centers, subject to final approval by the Federal Trade Commission (FTC). Up to 140 Flying J Travel Centers across North America could have their full-service restaurants converted [image-nocss] to Denny's.
Denny's expects to begin the Flying J conversions in the second quarter of 2010 and to have a majority of the conversions completed by year end. On an annualized basis these conversions are expected to add an estimated 7% to 8% to Denny's system-wide sales. Denny's franchisees will convert and operate most of the Flying J locations with the company planning to convert and operate approximately 15 of the restaurants.
The capital outlay is expected to be approximately $525,000 per conversion. The parties expect existing employees will generally remain in place.
Pilot and Denny's have identified 50 existing and proposed Pilot Travel Centers as potential Denny's locations. These new travel centers and conversion opportunities will occur over the next several years as Pilot resumes its normal development pipeline.
Commenting on the potential venture, Nelson Marchioli, CEO of Denny's, said, "This is a meaningful opportunity for Denny's to expand the Denny's brand and provide further development options for our franchisees. Based on the success of our seven existing Pilot locations and four Flying J conversions, we expect this agreement will truly add long-term value for the company, its shareholders and franchisees. We value the relationship we have developed with Pilot, and we have demonstrated that Denny's enhances the experience for Pilot's existing customers. The combination of our two brands is a natural fit and the performance of our initial locations has exceeded expectations. Developing restaurants along our nation's highways has always been an important part of Denny's heritage, and this relationship represents the culmination of many years of work."
Jimmy Haslam, CEO of Pilot, said: "We are very excited to grow our partnership with Denny's restaurants. We believe that the success of the concept is proven based on the results of the conversions already completed and we look forward to rapidly expanding the conversions. By aligning our brands, our mutual focus on quality and our commitment to satisfying customers, we believe this will result in a great opportunity to better service the traveling public. We look forward to building on this relationship with Denny's and their leadership team."
Spartanburg, S.C.-based Denny's is one of America's largest full-service family restaurant chains, consisting of 1,318 franchised and licensed units and 233 company-owned units, with operations in the United States, Canada, Costa Rica, Guam, Mexico, New Zealand and Puerto Rico.
Pilot Travel Centers is headquartered in Knoxville, Tenn., employs 13,000 nationwide and is held in a partnership between Pilot Corp., wholly owned by the Haslam family and Propeller Corp, wholly owned by the funds advised by CVC Capital Partners, a global private-equity firm.
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