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A Grand Slam: Denny’s SoCal Success Story

Denny's Coffee
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Who among us hasn’t eaten at least one meal at Denny’s? You’ll find many types of people eating at this American favorite — hungover college students, vacation-goers, long-haul truckers, and rambunctious families. They come for the comfort food, the big portions, and the low prices. But many people don’t realize that Denny’s was founded right here in Southern California, by a man whose pie in the sky dreams changed the food industry forever.

"Great Food, Great Service, Great People…Every Time"
Denny’s proprietary slogan

Harold Butler was born in chilly Rochester, New York. His father was a button salesman, and from an early age Butler proved to be an enterprising salesman. As a child he sold maggots to fishermen as bait, and later resold his father’s discarded sample buttons to tailors. In his teens, he started a successful building supply store.

By the time he was 21, Butler had made his first million dollars. But unwise investments in the stock market decimated his fortune. Ashamed to tell his parents about his dire financial situation, he borrowed $2,000 from an uncle and bought a donut machine. In the early ‘50s, he packed up his possessions, including the machine, and headed for sunny Southern California, determined to start again.  

Fun Denny's Fact: For over 30 years after opening its doors in 1953, most Denny's restaurants did not contain locks. This changed in 1988, when most Denny's closed in observance of Christmas after remaining open 24 hours a day, 365 days a year, for just over three decades.

In 1953, Butler and partner Richard Jezak opened Danny’s Donuts in the small town of Lakewood, California. “I put my last $50 into that first doughnut shop,” Butler recalled years later. According to the Los Angeles Times, Butler’s first years in SoCal were filled with ups and downs:

…an industry enigma. It started out as a 900-square foot donut shop in Lakewood that sold fresh donuts stuffed with jam (not jelly) and served high quality coffee-something few competitors offered. Early success prompted Butler to build a second Danny’s in Garden Grove, but customers failed to show up. Butler says, “I found out I couldn’t walk on water.” Instead of sinking, he added a grill. Suddenly, he operated a donut shop that also sold hamburgers.

Butler continued to expand the menu, adding popular breakfast foods and lunchtime staples. "I love to feed people," Butler once remarked. The no-frills chain’s success buoyed Butler’s simple belief that “a plateful of good food is enough of a draw to attract plenty of customers.” It also fit perfectly in with the growing car culture of the times. As more people became middle class, they took more vacations — usually using the state’s expanding freeway system. Butler began to keep his diners open 24-hours a day to appeal to commuters and travelers. "After we opened our fifth restaurant," Butler remembered, "I looked at all the traveling going on in California and said to myself, 'My God, this is the future.'"

Denny's Coffee Shop Menu Cover, 1960s
Denny's Coffee Shop Menu Cover, 1960s. | Photo: Roadsidepictures/Flickr/Creative Commons License

By 1959, Jezak had bowed out of the business, and Butler had opened 20 Danny’s restaurants. This meteoric growth was facilitated by an aggressive franchising push and the fact that Californians were hungry for the kind of fast-serve, sit-down restaurant model that Danny’s pioneered. That year, he also changed the name — which he had picked simply because he liked the sound of it — from Danny’s to Denny’s, to distinguish his restaurants from the popular Coffee Dan’s chain.

By 1966, there were 101 Denny’s restaurants (78 franchised, 23 company owned) in several western states. “Harold in many respects was the father of franchising in this country," remembered longtime chain leader Michael Mooslin, who worked under Butler for 17 years at Denny's. Butler was consistently trying to maximize customer convenience, realizing that people were “moving around faster,” and that often both mother and father were too busy to cook three square meals a day. “The trend is fast food and shorter menus, with emphasis more and more along the hamburger line,” he told a reporter that year. “Right now, we’re trying out a mushroom burger.”

Butler also utilized America’s expanding highway system to his advantage. New restaurants were often built off major freeways, and they were designed to welcome all travelers — be they driving cross country or home from work.

Construction of new Denny’s continued at breakneck speed. “Even at this rate we’ll never catch up to the market,” Butler said at an industry conference. “Just to keep up, we’d have to add a unit for every 50,000 increase in population. We haven’t begun to fully tap the Western market, so for the present we have no plans to go nationwide.”

But at plush company headquarters in La Mirada, trouble was brewing. By the late ‘60s, there were over 500 Denny’s in twelve states, including Mexico. But Butler was not content to just be the patriarch of a powerful chain of restaurants. In classic American fashion, his eyes were getting too big for his stomach.

In 1968, Denny’s bought another SoCal staple, Winchell’s Donut House. Butler also began to push for a merger with Marie Callender’s Pies Inc., another homegrown SoCal business. When the Callender family demurred, the company’s lawyers alleged that Butler simply sent a mole into the family’s bakery to steal the secrets of their success. According to a lawsuit filed by the company:

Woven through the Superior Court suit, filed in Orange County, are allegations of espionage involving such things as dough mixes, egg glazes, pie crusts and oven temperatures and the alleged luring away of a trusted employee who knew the long-guarded secrets of pie making.

After a prolonged court suit, a judge ruled that pie recipes could not be protected but also that Denny’s could not use Callender’s exact formulas.

Much more serious trouble was just around the corner. Butler’s dreams of expansion also included an overwhelming urge to get into the casino business. In 1969, Denny’s Restaurant began negotiations to purchase Caesar’s Palace by merging its parent company, Parvin-Dohrmann Co., into Denny’s. This deal led the Securities and Exchange Commission to charge that Denny’s and Butler “participated in a ‘scheme’ to provide high profits to a small group of Parvin-Dohrmann stockholders at the expense of the majority of Denny’s stockholders.” According to the Los Angeles Times;

Without admitting to any of the SEC allegations, Denny’s entered into a consent judgement, enjoining the company from future violations of securities laws.
Denny's Breakfast
Denny's Breakfast. | Photo: Marc Lee/Flickr/Creative Commons License

This scandal caused Denny’s stock to plummet, and after imploring shareholders to “keep the faith,” Butler was forced to resign in December of 1970. At a 1972 shareholders’ meeting, new President Robert Ebrele stated, “we know now we should stick to the business we know best — our Denny’s Coffee Shops and the Winchell Donut chain.”

Denny’s continued to flourish throughout the ‘70s and ‘80s. In 1977, the company introduced their iconic “grand slam” meal for only $1.99. They took over the wildly successful El Pollo Loco chain and expanded to over 1,000 Denny’s all over the country. In 1989, company headquarters was moved from La Mirada to booming Irvine, in Orange County. Butler, their prolific founder, was busy as well — during the next twenty years, Butler would run or open almost a dozen restaurant chains, including JoJo’s and Naugles, with varying degrees of success and failure.

The ‘90s would be a troubled time for Denny’s. New fast-casual restaurants and expanding fast food chains began to eat into sales. The company was also charged with wide-spread racial discrimination. In 1994, the company paid out a $50-million-dollar settlement to victims, and began a decade long process of diversity training and instituting more inclusive hiring practices. By the time Butler died in Mexico in 1998, his brain child was on its way to being considered one of the most diverse restaurant chains in the country, with over 1,200 stores worldwide.

Today, Denny’s continues to be a mainstay attraction of roadside America, with 1,700 diners, most opened seven days a week, 24 hours a day. Although growing health concerns and changing tastes have in many ways made it a relic of the last century, it seems there will always be people just hankering for pancakes, fries and bottomless cups of coffee.

Denny's Open Late
Denny’s continues to be a mainstay attraction of roadside America, with 1,700 diners, most opened seven days a week, 24 hours a day. | Photo: Curtis Perry/Flickr/Creative Commons License

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