Applebee's bounces back, plans to resume expansion

The chain's improved performance is proof full-service chains are holding their own against fast casual, executives stressed.

Applebee’s first-quarter sales surge did more than prove the casual leader’s turnaround is well underway, the CEO of parent company Dine Brands Global declared to investors on Wednesday. With sister brand IHOP also posting a healthy bump, “I'd like to put to rest false news about the death of casual family dining,” Steve Joyce tartly commented.

Applebee’s comeback was particularly strong proof, he says afterward in an interview with Restaurant Business. The 1,912-unit chain, the segment’s leader by at least 600 stores, posted a same-store sales increase of 3.3% for the quarter. Joyce told investors it was the steepest rise for the brand since the first quarter of 2011.

He notes that the chain should be ready to resume expansion in 2019. Eighty-six stores have been closed in the past year.

He also says Dine Brands is proceeding with plans to acquire more brands."We’re in the process now of going through all of the conversations and reviewing what’s out there," he tells RB. "You’ll see an announcement in the not-too-distant future of us bringing in some people to help us with that," with a deal likely announced in the next year.

Dine Brands did not divulge transaction figures for either of its brands, but Applebee’s President John Cywinski described the trend for his charge as “the best sustained traffic performance Applebee's has achieved in more than a decade.” 

He attributed the pattern to an increase in frequency from both light users and “our important core heavy users,” along with the return of some customers who’d been turned off by Applebee’s upmarket drift in prior years.

Joyce tells RB that Applebee’s limited-time offers have been particularly effective in pushing up sales. He cited the example of an all-you-can-eat deal for chicken fingers or Riblets, the signature style of rib that Applebee’s brought back to the menu after it was dropped by a prior regime. “You couldn’t find a Riblet anywhere in the country. We sold out and had to end the promotion a week early,” says Joyce.

Cywinski also mentioned the resurrection of Applebee’s discarded “Eatin’ Good in the Neighborhood” ad slogan as a sales and traffic driver.

Acting Dine Brands CFO Greggory Kalvin noted that the group had contributed an extra $13.5 million to Applebee’s franchisee-fed ad fund during the first quarter, and intends to provide another $16.5 million in Q2.

The outreach efforts have helped Applebee’s diversify its customer base, according to Cywinski. He reported that millennials, “believe it or not,” now account for 30% of Applebee’s customer base, followed by Gen Xers at 28%, baby boomers at 27% and Gen Zers at 15%.

Joyce stressed to investors that about half of Dine Brands’ customers are under age 34. “The last time I looked, those are millennials,” he commented, referring to assertions that the all-important generation is abandoning casual and family dining for fast-casual concepts.

An all-you-can-eat LTO, a $3.99 deal for unlimited pancakes, was also a factor in IHOP’s 1% rise in same-store sales, according to President Darren Rebelez. The promotion is an annual event for the chain, but 2018 marks the first time the supporting marketing effort mentioned a price.

Rebelez also noted the contribution of a 31% rise in IHOP’s to-go sales, which now account for about 6.5% of the total.

Overall, Dine Brands posted a net income for Q1 of $17.1 million, a year-over-year increase of 9.5%, on revenues of $188.2 million, down 1.7%.

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