Denny’s ® Corporation The Grand Slam America’s Real Breakfast | 2008 Annual Denny’s Corporation Report 203 East Main Street, Spartanburg, SC 29319 Denny’s Corporation 2008 Annual Report DENNy’S DENNY’s IS ONE OF AMERICA’s LARGEST FULL-SERVICE FAMILY CORPORATE INFORMATION RESTAUR ANT CHAINS, WITH MORE THAN 1,500 LOCATIONS IN 49 STATES AND INTERNATIONALLY. FOR MORE THAN 55 YEARS, DENNY’s HAS BEEN SERVING UP REAL BREAKFAST 24/7. CORPORATE OFFICERS Nelson J. Marchioli(1,2) S. Alex Lewis(1,2) Jill A. Van Pelt(1,2) 80% 35 $25 Chief Executive Officer and President Vice President, Information Technology and Vice President, Human Resources 80% 34 Mark E. Chmiel(1,2) Chief Information Officer Richard B. Koston(2) 75% 30 $23.2 (2) 20 Executive Vice President, Chief Marketing R. Gregory Linford Regional Vice President of Operations 60 66% 66% 25 and Innovation Officer Vice President, Procurement and Distribution Frederick J. Nielsen(2) Janis S. Emplit(1,2) Enrique N. Mayor-Mora(2) Regional Vice President of Operations 23 15 20 Executive Vice President, Chief Operating Officer Vice President, Financial Planning and (2) 40 21 20 Leo Thomas F. Mark Wolfinger(1,2) Analysis and Investor Relations Regional Vice President of Operations 15 $12.5 10 (2) 34% 34% $10.5 Executive Vice President, Chief Administrative Susan L. Mirdamadi James M. Wainwright(2) 10 Officer and Chief Financial Officer Vice President, Operations Strategy and Support 20 25% Regional Vice President of Operations 5 Timothy E. Flemming (1,2) Ross B. Nell(1,2) 20% J. Scott Melton 5 Senior Vice President , General Counsel and Vice President, Tax and Treasurer $4.2 Assistant General Counsel(1,2), Corporate Chief Legal Officer (2) (1) (1,2) 0 0 0 Gregory P. Powell Governance Officer and Secretary John W. Dillon(2) Vice President, Concept Innovation 2005 2006 2007 2008 2005 2006 2007 2008 2005 2006 2007 2008 Vice President, Marketing William H. Ruby(2) System Mix New Restaurant Openings Adjusted Income Before Taxes Stephen C. Dunn(2) Vice President, Sales Vice President, Development Thomas M. Starnes(2) Franchised Company Jay C. Gilmore(1,2) Vice President, Brand Protection, Quality and Restaurants Restaurants Vice President, Chief Accounting Officer Regulatory Compliance (1) Officer, Denny’s Corporation and Corporate Controller (2) Officer, Denny’s, Inc. SELECTED FINANCIAL HIGHLIGHTS (dollars in millions) $600 $60 $50 $553.8 $47.2 $50.9 40 $48.2 DIRECTORS OF $453.3 400 40 DENNY’S CORPORATION SHAREHOLDER INFORMATION $38.5 30 $33.1 $33.1 $353.0 Debra Smithart-Oglesby Corporate Office: For Financial Information: $327.6 $31.6 $27.9 Chair Denny’s Corporation Call (877) 784-7167 20 President, O/S Partners 203 East Main Street Email [email protected] 200 20 Vera K. Farris Spartanburg, SC 29319 or write to: President Emerita and Distinguished Professor of (864) 597-8000 Investor Relations 10 Denny’s Corporation The Richard Stockton College of New Jersey Independent Auditors: 203 East Main Street Brenda J. Lauderback KPMG LLP 0 Spartanburg, SC 29319 0 0 Retired; Former President of Wholesale and Retail Greenville, SC 2005 2006 2007 2008 2005 2006 2007 2008 2005 2006 2007 2008 Group of Nine West Group, Inc. Other investor information such as news releases, Transfer Agent for Common Stock: SEC filings and stock quotes may be accessed from Total Debt Nelson J. Marchioli For information regarding change of address or Denny’s investor relations web site at: ir.dennys.com Cash Interest Expense Capital Expenditures Chief Executive Officer other matters concerning your shareholder account, and President of Denny’s Corporation please contact the transfer agent directly at: Annual Meeting: Wednesday, May 20, 2009 Robert E. Marks Continental Stock Transfer & Trust Co. Spartanburg, SC President, 17 Battery Place Marks Ventures, LLC (dollars in millions) 2008 2007 2006 2005 New York, NY 10004 www.curran-connors.com (212) 509-4000 / Michael Montelongo Senior Vice President, (800) 509-5586 Franchised restaurants 1,226 1,152 1,024 1,035 Inc. Chief Administrative Officer of Sodexo, Inc. Company restaurants 315 394 521 543 Bond Trustees: Louis P. Neeb 10% Senior Notes due 2012 Same-store sales Connors, Chairman, Mexican Restaurants, Inc. U.S. Bank National Association & Attn: Corporate Trust Department Franchised restaurants (4.6%) 1.7% 3.6% 5.2% Donald C. Robinson 60 Livingston Avenue Company restaurants (1.4%) 0.3% 2.5% 3.3% President, Baha Mar Resorts, Ltd. Curran St. Paul, MN 55107 Revenue by Donald R. Shepherd (800) 934-6802 Company restaurant sales $ 648.3 $ 844.6 $ 904.4 $ 888.9 Retired; Former Chairman, Loomis, Sayles & Company, L.P. Stock Listing Information: Franchised and licensed revenue $ 112.0 $ 94.8 $ 89.6 $ 89.8 Denny’s Corporation common stock is listed on the Designed NASDAQ Capital Market® under the symbol DENN. Total operating revenue $ 760.3 $ 939.4 $ 994.0 $ 978.7 Net income (loss) $ 14.7 $ 31.4 $ 30.3 $ (7.3) Total debt $ 327.6 $ 353.0 $ 453.3 $ 553.8 The handheld version of Denny’s Grand Slam breakfast, the Grand Slamwich. TO OUR VALUED SHAREHOLDERS Denny’s is an American icon. The brand began more than 55 years 120% compared with the prior year. We improved operating ago in California and has expanded to locations in 49 states and profitability through initiatives to lower food and labor costs and internationally. Over that time Denny’s guests have come to rely increased organizational efficiency with reductions in administra- on us for real breakfast and 24-hour service. While our restaurants tive and support costs. We paid down our debt by more than still deliver the same great food and great value they always have, $25 million, after $100 million reductions in each of the prior two we are becoming a different company than we were several years years, which contributed to an 18% decrease in interest expense ago—a better company. Over the past few years, we have been in 2008. With fewer company restaurants to maintain we also undergoing a transformation into an organization that is stronger reduced our capital expenditures by 16% compared with the prior from a financial perspective, more innovative in its marketing and year. Such improvements would be welcome in any period, but operations, and better-positioned to drive growth across the brand. to realize these achievements in such a difficult environment confirms our strategic direction. In early 2007, we introduced our franchise growth initiative, or FGI. This program had two primary business objectives—to transition Importantly, this transition is also resulting in energized growth Denny’s to a franchise-based business model with higher margins across the Denny’s system. We have enjoyed strong interest and and lower capital requirements; and to seed new franchise restau- participation in FGI from both new and existing franchisees, result- rant development. ing in the most franchise restaurant openings since 2002. In 2008, 34 new Denny’s restaurants were opened compared with 23 in Through the success of our FGI program and the sale of 209 the prior year. In addition, we have commitments to build more company restaurants to franchisee operators, we have shifted than 120 new restaurants over the next five years. Denny’s is our system mix to 80% franchised restaurants, up from 66% two also pursuing new avenues for development to supplement our years ago. The sale of lower-volume, less-profitable company traditional growth channels. During the year, we expanded our restaurants allows us to optimize our company restaurant portfolio relationship with the largest operator of travel centers—Pilot while expanding our brand and providing growth opportunities for Travel Centers. To date, we have three locations open and we are our franchisees. very pleased with their strong sales performance. The financial benefit of this optimized business model is evident in Despite these positive developments our biggest challenge, as a our improving results. In 2008, we increased our adjusted income restaurant operator and a franchisor, remains driving profitable before taxes, our internal measure of profitability, by more than guest traffic. Over the past few years, we have been able to raise WE ARE NOW IN A FAVORABLE POSITION TO MANAGE THROUGH THESE DIFFICULT TIMES AND TO PROSPER WHEN THE ECONOMY TURNS. average guest check through proactive menu management and We are in the midst of the most challenging economic environment drive intermittent traffic increases through selective discounting. in the history of Denny’s and therefore remain cautious in our However, we have not been as successful as we had planned in near-term outlook. However, the Denny’s brand has never been attracting and retaining light or lapsed customers that have drifted stronger and we are encouraged by the opportunities ahead of us away from Denny’s over the years. and the commitment of our team and our franchisees to capitalize on them. Over the past few years we have greatly strengthened We are confronting this fundamental objective with heightened Denny’s financial position by aggressively reducing debt and enthusiasm, resources, and talent. We are being aggressive in our extending our maturities. We are now in a favorable position to pursuit of guest traffic growth, and are following two distinct paths manage through these difficult times and to prosper when the to the customer: value and innovation. In 2008, we began the roll- economy turns. out of our new product pipeline including a brand new AllNighter menu for late-night, our new Sizzlin’ Skillet line of entrees, check I want to thank our employees and our franchisees for their hard builders like our Pancake Puppies, and the handheld version of our work to improve and grow the Denny’s brand.