UPDATE: This story has been updated to include additional comments from Applebee's.
Americans are regaining their appetite for eatin’ good in the neighborhood.
Same-store sales at Applebee’s rose 4.9% in the second quarter, ending a period of eight straight quarters of negative same-store sales that prompted some soul-searching at the 1,577-unit casual-dining chain.
The growth came primarily from higher traffic. Many customers came in for Applebee’s value-focused 2 for $25 menu, which offers an appetizer and two entrees starting at $25.
After cycling through a series of value strategies, including a $9.99 combo meal, Applebee’s has settled on 2 for $25, which it has offered on and off for more than 20 years.
It has been working to refresh the longtime offer, highlighting a new entree each quarter this year, including Bourbon Street Cajun Pasta, a Sizzlin’ Steak Skillet and now a Chicken Parmesan Fetuccine.
Thirty percent of Applebee’s transactions had some value attached in the period, down slightly from recent quarters where it hovered around 33%.
“We had strong performance in both traffic and sales at Applebee’s during the first two quarters of the year, even into July, driven exactly by 2 for $25,” said John Peyton, CEO of Applebee’s parent Dine Brands, during an earnings call Wednesday. “Our strategy is to lean into 2 for $25 as our consistent and primary marketing message for the year.”
Applebee's has pushed 2 for $25 in both traditional TV ads and on social media, where it recently hired a three-person team to produce content. Early results from the beefed-up social strategy have been promising: On TikTok, Applebee’s video views are up 500%, user reach increased by 760%, and video likes climbed 1,000%, Peyton said.
Besides boosting Applebee's exposure, social media has also proven to be an effective traffic driver. In the quarter, Applebee's ran a campaign for an all-you-can-eat promotion on social for three weeks after the TV advertising window had ended and saw no change in traffic, Peyton said in an interview.
"Typically when we go off air on TV, we see a decrease in traffic, and so that tells us that our social media effectiveness is much greater than it's been in the past," he said.
Off-premise has also become a traffic driver after Applebee’s extended national promotions to its to-go channel and developed some off-premise-only offers as well. In the second quarter, off-premise accounted for 22% of sales, split almost evenly between pickup and delivery. Off-premise same-store sales were up nearly 8% year over year.
Applebee’s began to see traffic turn positive in March, and the trend continued through the second quarter and into the current period, he said. The momentum led Applebee’s to upgrade its sales outlook for the year: It’s now expecting same-store sales growth in the range of 1% to 3%, compared to negative 2% to positive 1% previously.
It's one of a number of casual-dining chains to see sales and traffic bounce back this year, joining BJ's Restaurants, Red Robin and Olive Garden.
On the development front, Applebee's is continuing to remodel restaurants with a brighter and cleaner look. Nine of its 10 largest franchisees have signed up to accelerate remodels, and Applebee’s expects to complete more than 100 of them by the end of the year, Peyton said. Remodeled restaurants have been generating better sales.
And its plan to open 12 dual-branded Applebee’s-IHOP restaurants in the U.S. this year remains on track. It opened its second such location in July in Uvalde, Texas. Parent company Dine Brands has high hopes for this concept, which has so far generated higher sales than the average stand-alone Applebee’s or IHOP.
Given the brand’s overall momentum, Dine is upping its investments in development and in the 47 company-owned Applebee's it took over earlier this year. It’s expecting G&A spending in the $205 million to $210 million range, up from $200 million to $205 million, and capital expenditures of $30 to $40 million, up from $20 million to $30 million previously.
As such, Dine lowered its annual outlook for earnings before interest, taxes, depreciation and amortization (EBITDA) to $220 million to $230 million, from $235 million to $245 million previously.
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