Financing

IHOP and Applebee's will permanently close more restaurants

Less than 100 IHOP locations are expected to close in the next six months, along with 15 units of sister chain Applebee's.
Photograph: Shutterstock

The IHOP family restaurant chain is expected to close as many as 99 restaurants during the next six months as the result of a financial review currently underway, and casual-dining sister brand Applebee’s Neighborhood Grill is expected to permanently shut down  15 branches during the fourth quarter, franchisor Dine Brands Global alerted investors Wednesday.

The announcement follows the closure of 16 IHOPs domestic and 20 Applebee’s outlets in the U.S. during the third quarter.

In disclosing financial results for the third quarter,  Dine Brands did not specify exactly how many “greatly underperforming” IHOPs it expects to close for good, limiting its projection to a “net closure of less than 100 restaurants.” The pancake chain posted a same-store sales decrease of 30% for the three-month period, but Dine Brands reported that the decline had narrowed to 23.5% for the week ended Sept. 27.

“While IHOP anticipates closing just under 100 of our underperforming restaurants in the next 6 months, we are optimistic about the continued improvement in sales numbers and are continuing to see improvement in our off-premise business, which has nearly doubled since the start of the pandemic," a Dine Brands spokesperson said in a statement issued to Restaurant Business. "Closures are part of the normal course of business in the industry, especially for a company of our size and footprint, and occur for many reasons – including a restaurant being in a lapsed trade area – where once vibrant traffic characteristics are no longer present – or as a result of leases expiring, among other reasons."   

Family-dining restaurants in particular have struggled during the pandemic. The breakfast daypart has struggled and has been less able to adapt to the takeout and delivery that have dominated during the pandemic. In addition, the late-night business has suffered as bars are closed and other events have been canceled. The sales challenges have contributed to the bankruptcy of a 49-unit IHOP operator in May. 

Applebee’s finished the quarter with a 13.3% decline, with comps turning positive, at 0.4%, during the last week of the period.

Dine Brands reported a net income for the quarter of $10 million, a decline of 58.2%, on revenues of $176.6 million, down 18.7%.

Update:  A comment from IHOP's parent company has been added to the story.

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