Fourth Quarter Results
For the fourth quarter of 2012, franchise and license revenue increased 7.5% to $34.2 million compared with $31.8 million in the prior year quarter. The $2.4 million increase in franchise revenue was primarily driven by a $1.5 million increase in royalties and a $1.1 million increase in occupancy revenue due to 55 additional equivalent franchise restaurants. Company restaurant sales of $81.7 million decreased $16.6 million due to 49 fewer equivalent company restaurants. This decrease reflects the continuing impact of selling company restaurants to franchisees as part of our FGI refranchising strategy that was completed at the end of 2012.
Denny's opened 12 new franchised restaurants in the fourth quarter of this year, including the third location in Honduras. The Company opened one company restaurant in the quarter in downtown Las Vegas and acquired one franchised restaurant location in the San Diego market for $1.4 million. During the quarter, Denny's closed 11 franchised restaurants, one company restaurant and sold eight company restaurants to franchisees.
Franchise operating margin increased $1.5 million to $22.3 million primarily due to the increases in franchise royalties and occupancy margin. Franchise operating margin (as a percentage of franchise and license revenue) was 65.2%, a decrease of 0.3 percentage points. The decrease was primarily due to lower initial fee revenue from refranchising fewer restaurants.Company restaurant operating margin decreased $1.6 million primarily due to the impact of selling company restaurants to franchisees. However, company restaurant operating margin (as a percentage of company restaurant sales) was 13.5%, an increase of 0.7 percentage points. The increase was primarily driven by lower payroll and benefits costs and lower other operating costs, partially offset by increases in product costs. Total general and administrative expenses increased $1.4 million primarily due to higher performance-based compensation expenses. Depreciation and amortization expense decreased by $1.5 million primarily as a result of the sale of restaurants over the past two years. Interest expense decreased by $1.8 million to $2.8 million as a result of a $30.4 million reduction in total gross debt over the last 12 months and lower interest rates under our refinanced credit facility.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV