The fate of dozens of Denny’s restaurants are hanging in the balance after a long-struggling franchisee for the beloved diner chain sought Chapter 11 protection on Wednesday, the latest in a string of bankruptcies involving a once-sprawling restaurant empire owned by a former McDonald’s executive.
The franchisee, EYM Diner, operated roughly 30 Denny’s restaurants at the time of its bankruptcy petition on Wednesday. A number of its locations had already closed in the lead-up to the filing, some quite recently.
Denny’s has been working behind the scenes to help keep the remaining restaurants open, the brand tells Fast Company.
EYM’s bankruptcy follows a lawsuit last month by one of its lenders, InterBank, which claims to be owed more than $18 million, and which has been pushing to have the restaurants sold to a more “capable” operator.
Citing inspections from Denny’s, InterBank’s lawsuit documents an extensive period of alleged operational decline for EYM, claiming the conditions at its restaurants are “poor and getting worse,” including “food safety conditions at several locations that would likely not pass muster with the health department.”
“Denny’s cannot permit the operation of a substandard restaurant without damage to its brand,” the lawsuit states.
A lawyer for InterBank did not respond to a request for comment.
With restaurants located across Texas and Florida, EYM and its affiliates this week sought protection from bankruptcy court in the Northern District of Texas.
The franchise is owned by fast food entrepreneur Eduardo Diaz, a former president of McDonald’s Mexico, whose various companies have filed for multiple bankruptcies in recent years, Restaurant Business reported.
Diaz did not respond to requests for comments.
The embattled entrepreneur previously operated Pizza Hut, KFC, and Panera Bread locations, including several that reopened this year under new ownership, as Fast Company previously reported.
Mark Burgess, Denny’s chief development officer, told Fast Company in a statement that the diner chain has worked with Diaz for two years to try sell the restaurants. That effort is still ongoing.
“There are viable restaurants in this group, and franchise partners within our system are willing to step in to help secure their future,” Burgess said.
Which Denny’s restaurants have closed?
According to a franchise disclosure document issued by Denny’s in April, Diaz operated 39 Denny’s locations as of the end of last year.
Some of those stores have since shuttered. A Fast Company review of the addresses revealed at least eight Denny’s locations affiliated with Diaz that have been marked as closed on review platforms or delivery services.
Texas
- 2655 Grapevine Mills Cir E, Grapevine, TX 76051
- 510 W Lyndon B Johnson Fwy, Irving, TX 75063
- 6480 N Fwy, Fort Worth, TX 76137
Florida
- 3701 Bee Ridge Rd, Sarasota, FL 34233
- 5603 E Hillsborough Ave, Tampa, FL 33610
- 1245 N Atlantic Ave, Cocoa Beach, FL 32931
- 255 E Altamonte Dr, Altamonte Springs, FL 32701
- 4390 US-27, Sebring, FL 33870
The locations appear to have closed recently, with reviews for some of the stores appearing as recently as this week.
As of Friday, the locations have either been removed from Denny’s store locator tool, have been marked as not accepting orders, or have phone numbers that appear to have been disconnected.
It was not immediately clear if any of the locations could reopen at some point.
Specific Denny’s closures were not mentioned in EYM’s bankruptcy petition, though a typical course of action would be for the company to ask for court permission to get out of its lease obligations following the bankruptcy.
The above list of store closures may not be complete. We’ll update this story if we learn of more.
Why does all this sound familiar?
This is not the first franchise bankruptcy to impact Denny’s in recent months. In September, franchise owner M15 Inc. closed several Denny’s restaurants in Minnesota and Wisconsin in the lead-up to a Chapter 7 bankruptcy filing.
Denny’s Corporation, which was taken private and delisted from the Nasdaq earlier this year after years of struggles, is now in the hands of private equity backers. As of the end of last year, the chain had 1,274 locations, most of which were franchise-owned.
This story is developing…