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Dine Brands sees tougher times ahead for Applebee's

Between 30 and 40 stores are now expected to close by Jan. 1.
applebee's storefront
Photograph: Shutterstock

Coming off a second consecutive quarter of same-store sales declines for Applebee’s, parent Dine Brands Global has lowered its expectations for the chain’s top line performance during the remainder of 2019 and raised its forecast of how many units will close by year’s end. 

The company now expects comps for casual dining’s sales and unit count leader to be flat or down as much as 1% for the fourth quarter, compared with a previous projection of same-store sales rising by up to 1.5%. Applebee’s same-store sales for Q3 declined 1.6%. 

Thirty to 40 restaurants could close before the end of 2019, compared with earlier guidance of 20 to 30 units, the company said.

The revisions reflect a difficult industry environment and tough comparisons with Applebee’s results from a year ago, when the chain offered all-you-can-eat riblets and chicken tenders and introduced a new three-course bargain-priced meal, Dine Brands said. 

In a conference call with analysts, Applebee’s President John Cywinski said the chain intends to get its turnaround back on track in part by outfitting servers starting next year with handheld ordering tablets. The devices should increase sales, particularly of drinks, while providing faster service for guests and better tips for servers, Cywinski said. He added that franchisees should benefit from savings on labor. 

Cywinski noted that the chain should also see benefits from an effort to improve guest satisfaction. The percentage of guests who experience a problem while frequenting an Applebee’s has dropped from 8.1% at the start of 2017 to 4.3%, he said. 

The casual chain has just introduced a limited-time offer of 25-cent boneless wings, a deal aimed at the 20% of Applebee’s regulars who hunt for bargains.

The bottom line should improve for franchisees in part because the chain has “successfully refined” the brand’s contracts with third-party delivery services “to ensure sustainable margins,” Cywinski said.  

IHOP posts a slight gain

Applebee’s sister concept, the IHOP family-dining brand, posted a rise in comps for the third quarter of 0.3%. Dine Brands also tempered its Q4 outlook for the pancake specialist, revising its comp sales expectations to 1% to 2%, from a previous range of 1% to 3%. 

IHOP is now expected to grow by a net of 10 to 20 locations during the remainder of 2019, from a previous target of 20 to 30. 

Dine Brands posted a net income for Q3 of $23.9 million, a 1.4% decrease from the year-ago quarter. Revenues rose 22% to $149.9 million, excluding advertising dollars collected from franchisees. 

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