The Committee to Enhance Denny's Issues Letter to Shareholders - Urges Vote on Gold Card to Elect Its Three Highly-Qualified Nominees

CHICAGO, May 10 /PRNewswire/ -- The Committee to Enhance Denny's announced today it has issued the following letter to shareholders relating to the May 19, 2010 annual meeting of Denny's Corporation (Nasdaq: DENN):

THE COMMITTEE TO ENHANCE DENNY'S URGES SHAREHOLDERS TO ELECT ITS SLATE OF THREE HIGHLY-QUALIFIED DIRECTOR NOMINEES

SHAREHOLDERS MUST CAST THEIR VOTES PRIOR TO THE MAY 19 ANNUAL MEETING  VOTE YOUR GOLD PROXY CARD TODAY

May 10, 2010

Dear Denny's Shareholder:

The Committee to Enhance Denny's is encouraged by the interest and strong support it has received from shareholders and franchisees of Denny's Corporation in its campaign to elect its slate of three highly-qualified director nominees at the 2010 Annual Meeting of Shareholders to be held on May 19, 2010.  Given our significant ownership stake of approximately 7.1% of the outstanding shares of Denny's, our interests are clearly aligned with those of all shareholders and our sole objective is to maximize shareholder value.  

ISS / RISKMETRICS GROUP SUPPORTS CHANGE TO DENNY'S BOARD

ISS / RiskMetrics Group, the nation's leading proxy advisory firm, recognized substantial operational issues and underperformance at Denny's and supports change to the Denny's board.  In making its recommendation that shareholders vote for the election of our nominee Jonathan Dash, ISS / RiskMetrics stated that Mr. Dash has "a successful track record of creating value in the restaurant business . . ." and that it believes "Mr. Dash's experience would enhance the board's industry expertise and help deal with operational issues."  

ISS / RiskMetrics also shares our concerns with Denny's key financial metrics and poor total shareholder returns as compared to its peers, particularly DineEquity's IHOP:

"In summary, our review of Denny's financial metrics shows long term underperformance compared to IHOP in terms of the restaurant footprint, revenue growth and [same store sales] metrics."

"Further, in terms of share price performance, Denny's underperformed DineEquity and its peers, even if we credit the entire stock rally post dissident Schedule 13D filing to the Flying J/Pilot Travel deal as the company suggests, which we don't believe is entirely appropriate, over 1-year, 3-year and 5-year periods ending May 3, 2010."

"As such, given the long-term underperformance issues, we believe dissidents have made a reasonable case for change at the board."

We believe the need for positive change is clear, and the support from ISS / RiskMetrics is an important step in achieving our objectives.  It is imperative that shareholders elect all three of our nominees to help ensure that our plan to maximize shareholder value is implemented.  

HOLD THE DENNY'S BOARD ACCOUNTABLE FOR THEIR DESTRUCTION OF SHAREHOLDER VALUE

The board must be held accountable for Denny's poor management, failed growth strategy, high operating expenses and extremely poor share price performance since its emergence from bankruptcy in January 1998 through December 31, 2009 as illustrated in the table below.  

Relative Shareholder Returns

Note:  Total returns including dividends:  $9.50 per share for Denny's on 1/08/98 and 142.30 for S&P 500 Restaurant Index on 1/08/98.

In an effort to distract you from their track record of destroying shareholder value, the Denny's board has made outrageous claims and personal attacks against our nominees.  These claims are false.  This election is a referendum on the board of a company that desperately needs change.  By electing our three director nominees, you will be sending a strong message to the incumbent board that real change is needed.  

THE STATUS QUO IS NOT ACCEPTABLE

The Denny's board would have you believe that they have done everything they can to turn the company around and that positive change is imminent.  However, given the board's track record of destroying shareholder value, we believe they are ill-equipped to address the serious issues facing the company.  Our nominees have a plan that is designed to maximize shareholder value.  A broad outline of our goals is as follows:

• Create a pay-for-performance culture that clearly and measurably aligns management's interests with those of shareholders
• Implement a cost structure that provides the company with a source of competitive advantage, by sustainably reducing annual operating expenses by at least $15 million
• Stop the declining trend in guest traffic and comp store sales with more effective marketing and an improved price-to-value relationship for the customer
• Rationalize capital expenditures to an average of less than $10 million per year
• Halt value-eroding sales of company-owned restaurant units at unreasonably low prices
• Refocus marketing efforts on a consistent value message
• Restore system-wide unit growth through franchisee development, while improving the company's relationship with its franchisees

As significant shareholders, our perspective is directly aligned with all shareholders of the company.  If our nominees are elected, they will work with the other board members to address the strategic, operational and financial issues facing Denny's without a bias towards perpetuating the strategic errors of the past.  

VOTE THE GOLD PROXY CARD TODAY

We urge you to vote the GOLD proxy card and NOT to sign any white proxy card sent to you by Denny's.  Even if you have sent a white proxy card to Denny's, you have every right to change your vote.  You may revoke that proxy and vote FOR our nominees - Patrick H. Arbor, Jonathan Dash and David Makula - by signing, dating and mailing the enclosed GOLD proxy card in the enclosed postage-paid envelope.  

Your vote is important, no matter how many or how few shares you own.  If you have any questions or need any assistance voting your shares, please do not hesitate to contact our proxy solicitor, MacKenzie Partners, Inc., by toll-free telephone at 800-322-2885, collect at 212-929-5500 or by e-mail at [email protected].

For additional information and updates on our solicitation, please visit our website at www.enhancedennys.com.  Thank you for your support.

Sincerely,

The Committee to Enhance Denny's

SOURCE The Committee to Enhance Denny's