If you take a road trip, then you might want to stop for a bite to eat. Some people will opt for McDonald’s Corporation (NYSE:MCD), and others will go with a healthier option like Subway. Both are quick and easy. But then there are people who would prefer to sit down and enjoy a meal. These folks might stop at Denny’s Corporation (NASDAQ:DENN), Cracker Barrel Old Country Store, Inc. (NASDAQ:CBRL), or IHOP (International House of Pancakes).
Though people don’t only dine at these establishments while on road trips, their strategic locations — often found right off a highway exit — helps their brand exposure in substantial ways. For instance, if you had never eaten at a Denny’s Corporation (NASDAQ:DENN), but you enjoyed it after stopping there during a road trip, then you would be more likely to dine at a Denny’s Corporation (NASDAQ:DENN) near your home. And you might recommend Denny’s to a friend, family member, or acquaintance.
With all three aforementioned companies focused on strategic locations, you might think that they’re all logical investment options. Unfortunately, it’s not that simple.
Best historical stock performance
DineEquity Inc (NYSE:DIN) added Applebee’s in 2007, and it’s now 99% franchised. This is a big plus as it leads to lower costs and stronger cash flow. IHOP restaurants are also mostly franchised. The bad news for DineEquity Inc (NYSE:DIN) is that revenue has been in decline on an annual basis. Therefore, the company’s marketing hasn’t been successful enough to overcome a weak consumer and increased competition.
DineEquity Inc (NYSE:DIN)’s current goals are to significantly increase marketing effectiveness, improve operational performance, and introduce fresh and innovative dishes. DineEquity Inc (NYSE:DIN) is also more focused on the health-conscious consumer than in the past.
Whether or not DineEquity can meet their marks on the above initiatives remains to be seen. While margins are strong, the company owns a debt-to-equity ratio of 4.34, which is considerably higher than the industry average of 1.0. This will impede growth potential, and it could lead to a dividend cut at some point down the road. (DineEquity is currently yielding 4.20%.)
DineEquity Inc (NYSE:DIN) might have the best historical stock performance of the three companies covered in this article, but it would be hard-pressed to continue that trend over the long haul.
More revenue decline
Denny’s Corporation (NASDAQ:DENN) is well-known for its $2, $4, $6, $8 value meals, it’s open 24/7, and debt management has been superb after the divestiture of company-owned locations. Denny’s is also confident enough in its future prospects that it’s opening approximately 50 locations this year. However, revenue has still been in annual decline.
Denny’s Corporation (NASDAQ:DENN) Canada recently made an interesting move, which was to offer a McDenny’s loyalty program and mobile app. The app allows customers to earn points, which can then be turned into dollars available for spending at Denny’s restaurants. What makes this app unique to apps for other restaurant chains is that you can use social networking sites to invite friends and family to a Denny’s Corporation (NASDAQ:DENN) restaurant. You can also transfer points to those friends or family members. Furthermore, if you “Like” Denny’s on Facebook, you can earn a point.
Denny’s is using another fun and interesting promotional tactic. If you check-in to a Denny’s restaurant in all 50 states, then you will will win a prize. The more restaurants you check into, the more the value of that prize increases.