Nation’s Restaurant News reports that the bitter proxy fight for control of three seats on Denny’s board of directors comes to a head Wednesday at the company’s annual meeting, the parent of the 1,500-unit family-dining chain has said the tactics employed by the dissident investor group to shake up management have alienated franchisees and could hurt business.

Denny’s franchisee association has even said it may take legal action should confidential corporate documents containing operational practices and agreements be disseminated to shareholders by the dissident investor group.

According to Denny’s franchisee association, the investor group — which calls itself the Committee to Enhance Denny’s and owns 6.5 percent of the Denny’s shares — has inappropriately obtained confidential documents related to the brand’s advertising funds and supply chain. The association said it would use legal action to stop any publication of those documents.

The investor group said in a statement that the documents were lawfully obtained and all allegations “are without foundation.”

Denny’s Corp. weighed in as well.

“As an 85-percent franchised restaurant company, Denny’s success is completely intertwined with the success of its franchise partners and it is critical that we have a strong and trusting relationship with them,” Debra Smithart-Oglesby, Denny’s board chairman, said in a statement this week. “The dissidents’ tactics have more than crossed the line and done significant harm to that relationship and they now threaten to do serious damage to the company and its prospects moving forward.”

“This is a very serious and troubling matter,” W. Craig Barber, chairman of Denny’s Franchise Association, said in a statement. “The DFA board is committed to protect our association and its members along with the integrity of internal processes under which we operate to serve the best interests of our members and the Denny’s brand.

“It is startling for a group proposing election to a public company board of directors to demonstrate questionable ethics and judgment by not only obtaining and distributing confidential documents, but misrepresenting them in an effort to further its own interests,” he continued in the statement. “We believe investors should evaluate their conduct carefully and consider whether such actions are in the best interests of the brand and therefore the stakeholders of that brand.”

The investor group urged shareholders to “ignore this last minute scare tactic and misdirection being used by the Denny’s board in its desperate attempt to entrench itself in the face of this election contest.”

The investor group, which includes Oak Street Capital Management and Dash Acquisitions, has nominated three executives to Denny’s board. The investors are seeking to remove Smithart, Denny’s chief executive Nelson Marchioli, and former chairman Robert Marks and replace them with members of their own investor group.

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