Denny's was founded under the name Danny's Donuts in 1953 by Harold Butler in Lakewood, California. Butler expanded to 20 restaurants by 1959, when he renamed the chain to Denny's to avoid confusion with another chain "Doughnut Dan's". The business continued to grow and by 1981, there were over 1,000 restaurants in all 50 U.S. states. In 1977, Denny's introduced the still-popular Grand Slam breakfast. In 1994, Denny's became the largest corporate sponsor of Save the Children, a national charity.

Denny's headquarters were located in Irvine, California, until 1991. At that time, the main office was moved to the Spartanburg, South Carolina, headquarters of the parent company Trans World Corporation that acquired Denny's in 1987. Eventually, Denny's operations dominated the parent company to such an extent that Trans World Corporation, after several name changes, became Denny's Corporation. It now trades on the NASDAQ under the symbol NASDAQ: DENN. Today, Denny's operates about 1,600 restaurants in 49 U.S. states (Wyoming is the only state without a Denny's), Canada and Mexico. There are also about 578 Denny's restaurants in Japan operated under a license by a subsidiary of Seven & I Holdings. In New Zealand, there are 5 Denny's Restaurants in Auckland Region, one in Wellington and one in Christchurch http://www.dennysrestaurant.co.nz Denny's New Zealand is run as a family restaurants concept and been operating successfully for nearly 20 years with great value menus. The restaurants are designed to create an ultra modern retrospec dining experience.

For much of its history, Denny's was notable for offering a free meal to anyone on their birthday. The offer only included a limited number of meal options from a special birthday menu. The promotional ritual ceased in 1993, though occasionally individual franchises will continue the tradition.