Denny's tries to move beyond breakfast

January 9, 2014: 11:23 AM ET

A new ad campaign attempts to entice customers to order different fare. Grilled tilapia, anyone?

By Beth Kowitt, writer


A Denny's photo of its tilapia entree.

FORTUNE -- Denny's is making a case for itself as more than just a spot for breakfast food.

On Thursday, the 60-year-old restaurant chain is launching a new ad campaign called "Welcome to America's Diner." It's the most recent step in Denny's (DENN) three-year-long bid to rebrand itself as a place where you'll be just as satisfied ordering a burger -- or even more ambitious dishes such as pot roast and grilled tilapia -- as you would be with its famous Grand Slam of two pancakes, two eggs, two sausages, and two strips of bacon.

Denny's sales are almost evenly split between breakfast, lunch, dinner, and late-night. But even after three years of attempting to broaden customers' tastes, about half of its business during non-morning hours still comes from breakfast items.

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"We think if we can become better known for what we do offer, which is a broader array of options, it gives us a much wider addressable market," says Denny's chief brand officer Frances Allen.

Denny's success with breakfast is elusive and coveted. The meal is mostly about habit and convenience, and customers are dramatically more likely to eat the same breakfast at the same restaurant day after day than they are with other meals. That has made it challenging for chains to break into the morning meal. (Wendy's is a recent example.)

Denny's is embarking on the opposite quest to build credibility for other parts of its menu, which also includes fare priced higher than eggs and the like. "They're trying to go after people who haven't traditionally come into Denny's," says Wedbush Securities restaurant analyst Nick Setyan.

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CEO John Miller says the move is actually bringing the 1,700-outlet chain closer to its roots. Denny's was traditionally like many diners, offering a menu of encyclopedic length and diversity. But as new concepts in fast casual (think Panera Bread (PNRA)) and quick-serve restaurants (industry parlance for fast food) proliferated, the family dining segment moved toward all-day breakfasts as a way to differentiate itself.

"In the last 10-15 years, our fast casual and quick-serve competitors have done a very good job of saying, We sell breakfast too," says Miller. "We don't want to give up that share, or share that with more and more categories and competitors without trying to reclaim some of the territory lost."

Family dining was one of the hardest hit areas of the dining sector during the recession. Setyan of Wedbush says the category lost 20% of its transactions during the economic downturn and has struggled to gain them back. Analysts say the company's core customers, who typically make less than $50,000, have been under the most pressure. Denny's at least has been outperforming its competitors, says Will Slabaugh of Stephens Inc.

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The company has in part tried to market its non-breakfast items by focusing on value. One in five customers orders off its $2,4,6,8 menu, which showcases items like its $2 cheese quesadilla, $6 classic burger, and $8 fried seafood platter. Executives also have made sure the menu had diner staples like spaghetti and meatballs and a quality burger.

Whether you're intrigued enough to venture beyond the egg or pancake options is almost beside the point. Denny's just wants to have piqued your interest enough to come in.

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