Applebee's parent foresees a future encompassing virtual brands

Dine Brands Global also plans to resume development of IHOP's fast-casual spinoff, Flip'd.
Photograph: Shutterstock

With a new CEO at the helm, the parent of Applebee’s and IHOP is adjusting its plan for the post-pandemic era to reflect recent lessons from the pandemic, including what the company learned from the discontinued test of a virtual wings concept.  

Executives of Dine Brands Global said a second virtual venture, Cosmic Wings, will figure into that new normal. The delivery-only concept generated $510 in incremental sales last week for each of the 1,250 Applebee’s restaurants that produce its Cheetos-flavored wings for delivery, according to Applebee’s President John Cywinski.  The seven-day stretch was Cosmic Wing’s first full week of operation, and sales grew day by day during the period, Cywinski said.

Many of the industry’s largest casual chains have launched virtual brands, but Dine Brands is one of the few to be on its second concept. Cosmic Wings replaced an early venture called Neighborhood Wings by Applebee’s, which had been tested in 700 stores.

That experiment provided such key insights as the need to keep a virtual brand separate from its mother operation; hence the lack of a connection to Applebee’s with Cosmic Wings, Cywinski explained.

The casual chain also learned that the virtual concept appealed to customers who were younger than a typical Applebee’s patron, and were likely to be male. Customers were not necessarily current patrons of Applebee’s, Cywinski indicated.

“I’m really glad we did Neighborhood Wings,” he said.

The revelations about Cosmic Wings came during the first quarterly analysts’ call hosted by Dine Brands new CEO, John Peyton, who joined the two-concept franchisor from the hotel industry. He succeeded Steve Joyce, whose contract was not renewed by the board when it expired at the end of 2020.

Peyton sketched out a mid-to-long-range strategy that was not significantly different from the one that Joyce had put forward, though with a few adjustments inspired by the pandemic. For instance, Peyton vowed to “realign our menu to reflect learnings from the last 12 months.” Like many operations, Applebee’s and IHOP had tweaked their menus for the sake of simplicity, execution and saving labor.

Peyton also indicated that both Applebee’s and IHOP will focus on retaining the bulk of their takeout and delivery business, which soared as dining rooms were closed and to-go became consumers’ only restaurant option. Peyton projected that both brands would benefit from pent-up demand for onsite dining.

“In the short term, the biggest opportunity is vaccines, vaccines, vaccines,” he said. “We are optimistic that people are anxious to get out, see other people, hug other people. And restaurants are the place to do that.”

One of the strategic objectives of IHOP is increasing the chain’s afternoon, evening and nighttime traffic. Although the family-focused brand has tried to bolster dinner business with such menu moves as revamping its burger choices, IHOP is still seen by many consumers as the place to have breakfast, not any later meal.

The chain made significant strides in that mission during the fourth quarter with an initiative called IHOPPY Hour, a riff on the happy hours widely used by liquor-serving restaurants to pull in consumers before dinner. IHOP added its version last September. Between 2 and 10 p.m., a number of popular items are offered at deep discounts. Entrees, for instance, begin at $5 in some markets, and drinks are priced as low as $1.

“IHOPPY Hour is driving incremental sales in the high teens,” said IHOP President Jay Johns. The promotion was “four times more effective” than other traffic drivers the chain has tried.

Johns revealed that IHOP plans to resume opening restaurants after pruning the system of 41 weak stores during the last year or so. Among the additions are likely to be branches of Flip’d by IHOP, a fast-casual riff unveiled by Dine Brands right before the pandemic started. The venture has largely been shelved because of the crisis.

Peyton said he intends to move forward with the goal set by Joyce of adding another franchise vehicle to Dine Brands’ holding. The company was reported to be among the suitors exploring an acquisition in pre-pandemic times of Pei Wei Asian Diner. Joyce would neither confirm nor deny those reports.

IHOP has struggled more than its casual sister during the pandemic, a reflection of its reliance on breakfast, the daypart with the sharpest drop in traffic.

For the fourth quarter of 2020, the chain’s same-store sales fell 30.1%, compared with a drop of 17.6% for Applebee’s. Comps for the week ended Feb. 21 dropped by 28.1% at IHOP and by 19.1% at Applebee’s.

Overall, Dine Brands posted a loss for Q4 of $1.6 million, compared with a net profit of $28.4 million a year ago. Revenues for the most recent period totaled $196 million, down 13.8% from a year ago.

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