Operations

Applebee's and IHOP eye co-branded locations in the U.S.

Dual locations have generated strong returns overseas and could provide a spark to the chains’ domestic development.
A rendering shows a co-branded Applebee's and IHOP in Dubai. | Image courtesy of Dine Brands

Applebee’s and IHOP could soon begin opening co-branded locations in the U.S. after the model has proven successful overseas.

Parent company Dine Brands has already opened eight such locations in Canada, the United Arab Emirates and Mexico. The restaurants are the same size as a regular Applebee’s or IHOP, but generate twice as much revenue because they cover all four dayparts, CEO John Peyton said Wednesday.

“The two brands are extraordinarily complimentary,” he said.

The co-branded units share a kitchen, but have two entrances—one for Applebee’s and one for IHOP. The dining room is similarly divided to preserve each brand’s identity.

“We don’t want them to become blurred and become some common color of brown,” Peyton said.

Co-branding was common in the early 2000s, but the operational and marketing challenges involved led to closures. The strategy has made a comeback in recent years, with brands such as Famous Dave’s and Auntie Anne’s owner GoTo Foods (formerly Focus Brands) reviving the idea.

Dine is still working out operational details such as how to allow customers in the same party to order from different menus. But it is excited about the potential returns the model could have for franchisees. The company is hoping to partner with an operator or two in the U.S. to begin opening co-branded locations here next year, Peyton said.

That could provide a spark for the company’s development plans, which have not met the expectations Dine laid out in 2021. The 1,600-unit Applebee’s was supposed to return to net new unit growth last year; instead it shrunk by 36, and is projecting 25 to 35 net closures again this year. The 1,800-unit IHOP has also fallen short of aggressive development targets.

Dine said the Applebee’s closures are mostly older restaurants in trade areas that have changed and are normal for a chain of its size. New openings have also slowed because the cost of building restaurants has risen. 

To that end, Dine is in the process of developing a new Applebee’s prototype that will be more cost-effective for franchisees. The changes will largely come in the kitchen, Peyton said, and feature more modern design and equipment, including robotics. 

In a vote of confidence in the brand, Dine announced that Applebee’s largest operator, Flynn Restaurant Group, plans to develop 25 new stores over the next seven years.

Applebee’s same-store sales declined 0.5% year over year in the fourth quarter. Executives said customers are continuing to limit their discretionary spending, which has hurt traffic, and are looking for value when they do dine out. In 2024, the brand plans to appeal to those guests with more discounts, like its recent Dollarita and all-you-can-eat wings promotions. At the same time, it will do more TV advertising and will begin rolling out new permanent menu items starting in April.

Same-store sales at IHOP rose 1.6% in the quarter.

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