Denny's Lines Up Its Own Operators as a 30-Unit Franchisee Fails

EYM Diner told a Texas bankruptcy court it has less than $50,000 in assets. Its liabilities run somewhere between $10 million and $50 million.

The Denny's franchisee, which operates 30 restaurants in Texas and Florida, filed for Chapter 11 protection in the Northern District of Texas on Nov. 4, Franchise Times reported. Its largest debt is $18.4 million owed to lender Interbank, according to the filing. Its largest unsecured creditor is the IRS, for unpaid payroll taxes, per Restaurant Business.

This is not EYM's first trip to court. The group, led by former McDonald's Mexico president Eduardo Diaz, has seen its Pizza Hut and Panera Bread affiliates file for Chapter 11, and it closed all of its Burger King and KFC restaurants in 2023 and 2024. Denny's own disclosure document listed 39 EYM restaurants as of April, Restaurant Dive noted. Thirty were open at filing.

The interesting part is what Denny's is not doing. When Out West, Outback's largest U.S. franchisee, filed earlier this week, Bloomin' Brands bid first for its 61 restaurants. Wendy's is moving to take back up to 163 Meritage units itself. Denny's, which is about 96% franchised, is steering the stores toward its own bench.

"There are viable restaurants in this group, and franchise partners within our system are willing to step in to help secure their future," said Mark Burgess, Denny's chief development officer. "We are working with those partners and other creditors through the necessary processes to transition operations of as many impacted restaurants as possible to experienced operators in our system."

That is a cheaper path for a franchisor that was taken private in January and has spent three years pruning. Denny's recorded 37, 74 and 60 net closures in the last three full calendar years, about 12% of its 2023 U.S. system, according to its disclosure document. Every store a healthy franchisee absorbs is a store that does not have to close, and royalties keep flowing without corporate putting up capital.

It also tells you something about the market. A franchisor only takes this route if it believes existing operators have the cash and appetite to buy. Whether they do at a price creditors will accept is the question the court will now answer, one restaurant at a time.