Denny’s Corporation (DENN - Snapshot Report) has recently forged a deal with Musiet Group to venture into Chile. Per the agreement, Musiet will set up 10 Denny’s restaurants in Chile over the next 15 years. The terms of the deal were not disclosed. The first unit is slated for a 2013 opening in Santiago.
Santiago, the capital of Chile, is considered one of the most dynamic and modern economies in Latin America with rapid urbanization. Further, the city is the regional headquarters to many multinational corporations catering to both business and leisure travelers. Hence, the opening of the first outlet is deemed to be apt strategically.
The latest alliance reflects management’s intent to make Chile one of the prime markets for international expansion, considering the under-penetration of quick-service restaurants as against the North American countries. To gain traction in the new market, Denny’s will offer breakfast, lunch, and dinner items on a 24-hours setting.
Operating 1,684 franchised, licensed and company-owned restaurants globally, Denny’s is on an expansion spree on both domestic and international fronts. At present, Denny’s has about 96 units abroad. The company foresees a large untapped potential for expansion outside of the U.S.
Apart from its recent entry into the Dominican Republic, Denny’s also has its presence in other Latin American and Caribbean countries like Costa Rica, Mexico, Honduras, Curaçao and Puerto Rico. In addition, Denny’s also entered into a long-term deal with the Great China International Group to foray into Asia’s largest country, China.
According to the company, so far the brand has been well accepted abroad. In fact, Denny’s intends to capitalize on this opportunity by expanding in new as well as existing markets. The latest Chilean deal is one such effort.
The development partner, Musiet Group, boasts significant local market knowledge and has a proven track record of operating a few leading local restaurants in that market. Further, Musiet Group enjoys the status of being the master franchisee for another U.S. based casual dining restaurant chain, Ruby Tuesday Inc. .
During the second quarter of 2012, Denny’s did not open any company-owned unit, but opened nine franchised units including two international units in the Dominican Republic and Canada.
Denny’s, which competes with the likes of Kona Grill Inc. (KONA - Snapshot Report) currently, carries a Zacks #3 Rank that translates into a short-term Hold rating. We are also maintaining our long-term Neutral recommendation on the stock.
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