[nabsgood]

http://www.usatoday.com/money/indust...3-dennys_N.htm

2 million enjoy free breakfast at Denny's


By Bruce Horovitz, USA TODAY
Some day, when Josh Richardson finally finds a job, he'll pay for a meal at Denny's. (DENN)

But in the pre-dawn hours Tuesday, the unemployed medical assistant from Greenville, S.C., waited 40 minutes in near-freezing temperatures outside a Denny's restaurant for a free Grand Slam breakfast. Roughly 2 million other Americans lined up at local Denny's for the too-good-to-pass-up deal.

"It's definitely a blessing," says Richardson, 35, who has been out of work since May. "I've put in applications everywhere — Wal-Mart, Kmart. I haven't heard nothin'."

With the economy in a tailspin, Denny's shook up the restaurant industry — if not the nation — Tuesday by doing something no family dining chain had done before: giving out free meals coast-to-coast from 6 a.m. until 2 p.m.

TELL US: Did you take them up on the offer?
SUPER BOWL: See the ad

An entire varsity basketball team came to a Denny's in North Hollywood, Calif. Dozens of college students skipped class in Jacksonville. Hundreds lined up in Fresno. The pre-dawn line was so long in Fort Collins, Colo., the Denny's opened 30 minutes early. The promotion was briefly halted and rain checks given out at a St. Louis Denny's when parking lot traffic nearly cut access to a freeway artery. Most sites averaged hour waits on what's usually the week's slowest day.

By midmorning Denny's in several places ran out of — horrors — pancake syrup. (The usually $5.99 Grand Slam includes two eggs, two strips of bacon, two sausages and two pancakes.)

Denny's was out to prove that it can play with the big boys in its business, and to get back on consumer radar. The chain that once owned breakfast — only to lose to McDonald's (MCD)— gave away a Grand Slam breakfast to anyone who showed up at all but two of its 1,550 restaurants nationwide. No strings.

The entire promotion — including food, labor and airing an ad on Sunday's Super Bowl — cost Denny's about $5 million. "We're re-acquainting America with Denny's," says CEO Nelson Marchioli. "We've never been thanked this much — and folks are saying they'll come back."

The gambit earned Denny's something that money alone can't buy: positive public relations, and lots of it. By Denny's estimates, it got $50 million in free news coverage, almost all of it positive. No injuries — or police issues — were reported at any locations, say Denny's officials.

"I'm very grateful," said Jennifer Haslam, who waited in line more than an hour in Newark, Del., with son Joshua, 2. "That was four eggs that I didn't have to use of mine." Her family lives on her husband's take-home pay of $400 a week. "I'll be honest. I just paid my rent. I had $10 to my name, and that went to gas."

Visibility points

Denny's didn't do this just out of the goodness of its corporate heart, however. The low-budget family dining chain did it because its franchise sales at sites open at least a year were down 7.2% last quarter at a time the hobbled economy ought to be giving it an opportunity to nudge the market-share needle. In tough times, many consumers are willing to trade down to restaurants such as Denny's. If value chains such as Wal-Mart and McDonald's can make hay in a bum economy, why not Denny's?

Well, first, people have to at least consider it among the options.

"A lot of consumers have written Denny's off their let's-go-there list," says Ron Paul, president of Technomic, a consulting firm. Denny's no longer ranks among the top players in the $83 billion breakfast market, whose top five players — McDonald's, Starbucks, (SBUX) Dunkin' Donuts, Burger King (BKC) and IHOP (DIN)— accounted for 22% of the volume last year, says Technomic.

Ah, but people love free stuff, particularly when money's tight. Few know that better than Dan Ariely, a business professor at Duke University, author of Predictably Irrational: The Hidden Forces That Shape Our Decisions. "Free is an emotional hot button. When free is concerned, there is no downside — or, at least, we don't see the downside immediately. So we overvalue everything that is free."

Which may explain why Denny's became a Google search darling after its ad promoting the giveaway aired during the Super Bowl. On Tuesday, "Denny's" was in five of the 40 most popular searches on Google, says Google spokesman Eric Obenzinger. No. 9 was "Denny's location." At 29 was "free breakfast at Denny's."

Denny's also purchased several search keywords from Google so a Denny's link showed up next to Google searches including "free breakfast" and "Denny's Grand Slam."

Filling the tables

Customers had their own reasons for trekking to Denny's, but more often than not, it was tied to value:

•Feed a team. Matt Skeadas, 28, brought the East Valley High School basketball team — 20 boys — from Van Nuys to the Denny's in North Hollywood. "We decided it would be a good team-bonding event."

•From Perkins to Denny's. Landon Bennett of Cape Coral, Fla., started his day early at a Perkins Family Restaurant for a regularly scheduled Bible study. But the group just got coffee there, then moved on to Denny's in North Fort Myers. "You reap what you sow," he says. And Denny's, he adds, "is going to reap rewards."

•Class study. Sociology teacher David Burke of Red Lion Christian Academy in Bear, Del., took his class to Denny's to observe how advertising and media have an impact on human behavior. And to eat, of course. "We're going to spend a whole class tomorrow talking about it," he says.

•Free — and tipless. Four seniors from Ulysses S. Grant High School showed up at Denny's in North Hollywood at 5:23 a.m. for free breakfast. All ordered Grand Slams and free ice water, then left for school without tipping. "It's just one day," says waitress Laura Martinez, taking the fact that she got stiffed in stride.

Most guests, however, left generous tips.

What Denny's did on Tuesday was an extra-generous form of "sampling." It's the most effective marketing strategy to bring back consumers who left a brand, or get new customers to try it, says David Vinjamuri, marketing professor at New York University. "In a recession, you try to add value, and sampling does just that."

Which helps explain why freebies have become so prevalent.

McDonald's, Starbucks, Dunkin' Donuts and Panera Bread all have had free coffee and food promos in the past year. Panera's free coffee and food sampling promo was last week.

"I'd rather give something away than discount it," says Ron Shaich, Panera's CEO. "If I've got something that I think is wonderful, I want to get it into the mouths of my customers."

A long road

For Marchioli at Denny's, it's been a very long slog to make Denny's food something that he's willing to brag about. It's taken him eight years to get the chain to a point where he actually felt comfortable enough to invite the public in for a free meal.

Marchioli vividly remembers his first thoughts when he was named CEO in February 2001 and started to visit stores: "This thing's in a ditch."

Not only was Denny's image a mess, but its service was unpredictable, and its food was entirely forgettable — with few new products in the pipeline. "I knew it was going to take a long, long time to fix it," he says.

Denny's was at the top of the restaurant industry curve shortly after it was founded in 1953 by Harold Butler in Lakewood, Calif. The notion of a 24-hour chain of clean, dependable coffee shops was new. With McDonald's not yet a factor at breakfast, about the only rivals were Howard Johnson and mom-and-pop diners.

By 1966, the chain went public, and within two years, had 192 locations. In 1977, the Grand Slam was rolled out nationally. By 1981, there were more than 1,000 Denny's.

But things already were heading downhill. In 1973, McDonald's introduced the Egg McMuffin and changed the breakfast game. Suddenly, folks could get a cheap breakfast quickly — without leaving their cars or leaving a tip.

By the mid-1980s, Denny's was struggling for an identity and a series of ownership changes took place.

Then, Denny's image bubble burst in 1993, when six black Secret Service agents ordered food at a Denny's in Annapolis, Md. It took so long to arrive, they eventually filed a class-action racial bias lawsuit for being denied service. The lawsuit was settled a year later for more than $54 million.

That lawsuit may have been the slap in the face that Denny's needed. It worked closely with the NAACP, and by 2000, Fortune named it the No. 1 company for minorities to work for in America.

On Tuesday, it unofficially became the No. 1 joint for a free breakfast.

At the nation's largest Denny's, in Las Vegas, the usual staff of 27 was doubled to 54 for the rush, says Marchioli. The staff was rotated every four hours to avoid burnout.

Consumer response to the promotion has been all Denny's could hope for. Besides guests at restaurants on Tuesday, the Denny's website has had 40 million hits since the Super Bowl ad aired.

"We've had a lot of fun today," Marchioli says, exhaling a small sigh of relief.

Then, he quietly admits the one thing that almost every customer — and business executive — wonders about the promotion.

Did Denny's really lose its burnt-orange shirt on it?

Marchioli is silent for a moment. He hedges. Then he concedes: If you factor in the profits from all of Tuesday's drink orders — which are far more profitable than food orders — "we'll do better than break even."

And, yes, he just may do it again.