Applebee’s is getting back into running restaurants.
Parent company Dine Brands said Wednesday that it has taken control of 47 restaurants from a pair of Applebee’s franchisees. It hopes to improve their performance through remodels and other changes before refranchising them in about three years.
“In conversation with the franchisees, we felt this was a better path forward for these restaurants than if they remained in the status quo,” Dine CEO John Peyton said during an earnings call Wednesday.
Previously, 100% of Applebee’s more than 1,600 restaurants were operated by franchisees. Dine’s decision to own some of them again comes at a pivotal moment for the casual-dining brand. Same-store sales have fallen for seven straight quarters, including a 4.7% decline in the fourth quarter. On Wednesday, Dine unveiled a four-prong strategy for turning the tide that includes new marketing efforts, menu changes and a remodel program.
The 47 restaurants will serve as a showcase of sorts for those initiatives, particularly the new Lookin’ Good remodel campaign.
“That allows us to demonstrate to franchisees what that looks like, what the ROI is, and put our money where our mouth is and do the same thing we’re asking of our franchisees,” Peyton said.
The remodels are expected to improve the customer experience at Applebee’s and drive repeat visits. The company is offering incentives to franchisees who sign up for remodels, and that program is already oversubscribed, Peyton noted.
About a dozen of the 47 restaurants are also candidates to be converted into dual-branded Applebee’s-IHOP locations, which have become a central part of Dine’s development strategy. The first such U.S. location opened last month in Seguin, Texas, and 12 to 15 more are expected to open this year.
The co-branded locations can generate up to 2 times the revenue of a stand-alone Applebee’s or IHOP, Peyton said.
Applebee’s is coming off a challenging year. Same-store sales declined 4.2% in 2024 compared to 2023, which the company has largely blamed on a slowdown in consumer spending. It has seen pullback among consumers earning less than $75,000 a year, a group that accounts for two-thirds of its customer base.
In response, Applebee’s spent much of the year focusing on value, rolling out a series of promotions such as 50-cent boneless wings and $1 margaritas. When that proved ineffective, it developed a limited-time value meal, the $9.99 Really Big Meal Deal, which launched in the fourth quarter.
That offer showed some promise, boosting traffic at lunch and off-premise, Peyton said. And though Applebee’s traffic was still negative for the quarter, it improved compared to the previous period.
“Breaking through in one quarter was not necessarily expected. It was to start to make progress and build on it, which is exactly what we did,” Peyton said.
This year, the chain will continue its focus on value by expanding the value section of its permanent menu. Its popular 2 for $25 offer will remain the centerpiece of that category, but it will be buttressed with similarly low-priced options for single customers and for groups.
Those will include some new menu items and combinations. They’re expected to launch in late spring or early summer.
Applebee’s is also changing how it markets this news, including a significant investment in social media that it believes will help it better connect with consumers.
The brand is also focusing on the appearance of its restaurants as it looks to improve the customer experience. That will include the aforementioned remodels as well as a new prototype that is more contemporary and built for off-premise. It expects to unveil the prototype in the second quarter and have the first one built this year.
But it will also continue to close underperforming restaurants that are a drag on the system, which it has been doing for years. It is expecting to have 20 to 35 net fewer locations by the end of 2025.
And despite its efforts to turn things around, Applebee’s is forecasting another slow year as the changes take hold. Same-store sales are expected to range from negative 2% to positive 1%.
Dine Brands stock was up about 1% on Wednesday morning after the moves were announced.
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