Did IHOP's publicity stunt hurt Applebee's?

Photograph: Shutterstock

peter romeo

Five years ago, even the keenest odds-makers wouldn’t have bet delivery would catch hold in the restaurant mainstream, winning converts as different as White Castle and The Cheesecake Factory. Yet it’s easier today to name the brands sitting out the boom than it is to rattle off the participants—a list that grows by the day (this week’s newcomers: Church’s Chicken and Boston Market.)

So where does the smart restaurant bettor plunk his or her money today?

The past week brought a fit of handicapping, from actual odds-making (the tote board on which restaurant chains are most likely to follow Buffalo Wild Wings into gambling) to more informal takes on what’s fueling the rebound of big full-service brands (courtesy of Brinker CEO Wyman Roberts). Here’s how various industry parties are betting, along with our own odds on their chances of winning.

Blaming Applebee’s problems on IHOb: A 15:1 long shot

Mud is flying in the legal struggle between Applebee’s franchisor Dine Brands Global and the chain’s second-largest franchisee—bankrupt RMH Franchise Holdings—over which party has the legal rights to RMH’s 160 restaurants. RMH wants to liquidate the portfolio and use the proceeds to ease the financial plight of its owners and creditors. Dine Brands wants to keep that sizeable chunk of the system under the Applebee’s banner, and has painstakingly recounted the steps leading up to RMH’s bankruptcy, a take that indicates it has a contractual right to assume ownership of the stores.

In a Hail Mary act of desperation, RMH is now alleging that Dine Brands was responsible for the franchisee’s revenue problems and reneged on a promise to let stores close if attempts at a turnaround for the brand didn’t deliver the promised results. RMH said it spent $2.9 million on the initiatives, which were undertaken by the regime that preceded Applebee’s current management team.

But the current group wasn’t spared in RMH’s legal counterattack. The franchisee alleged in court documents that Dine Brands shot Applebee’s in the foot by temporarily changing the name of the franchisor’s other restaurant chain to IHOb, a publicity stunt intended to call attention to a new burger line from the brand known as the International House of Pancakes. RMH noted that about 15% of Applebee’s sales come from burgers, so wasn’t Dine Brands intentionally trying to steal that business for its pancake concept? And isn’t that proof the franchisee agreement with RMH was effectively nullified by Dine Brands’ bad moves?

We don’t quite see it, in part because RMH’s problems emerged long before the much-ballyhooed IHOb move. And Applebee’s reported a 5.7% gain in comp sales for the quarter covering the ploy by its sister brand, the casual concept’s strongest showing in years.

Hooters’ chances of following Buffalo Wild Wings into gambling: A 3:2 lock

Those are the actual odds set by MyTopSportsbooks.com, a website for online gamblers. It also views Famous Dave’s as a likely convert (odds of 3:1) to in-restaurant sports betting, the amenity that both Buffalo Wild Wings and Chili’s are already checking out as a possible new revenue source. But—surprise, surprise—don’t expect church-championing Chick-fil-A to jump aboard that bandwagon. MyTopSportsbooks pegs the unlikelihood as a 30:1 long shot.

The review service, which helps bettors find legal sportsbooks, looked at what chains are most and least likely to offer on-premise gambling now that the U.S. Supreme Court has cleared the way for states to legalize the pastime. It picked Buffalo Wild Wings as the clear favorite, not only because the chain has acknowledged an interest, but also because an online betting service, Draft King Sportsbook, has been identified by the gaming community as the casual brand’s likely partner.

Here are some other brands on MyToptSportsbooks' tip sheet, along with the odds they’ll embrace gambling:

Miller’s Ale House     9:2

Outback Steakhouse 6:1

Applebee’s                 8:1

Chili’s                          8:1

Waffle House             16:1

Independents will lose big-time to casual chains: A 3:1 maybe

Conventional wisdom holds that independent restaurants are faring much better sales- and traffic-wise than big casual-dining chains, but that’s not how Brinker International CEO Wyman Roberts would bet. “Independents are struggling a little more than some people would actually like to acknowledge,” Roberts told investors after announcing the best same-store sales gains in more than three years for Chili’s, Brinker’s big brand. “They are struggling, I think, with a lot of the headwinds that the industry is facing, and they don't have the leverage, the scale, the insight to deal with it.”

A tip from Roberts would normally be akin to a stock recommendation from Warren Buffett, but the casual-dining veteran’s comments came around the same time two publicly owned independent groups released their financial results for the second calendar quarter. One Group Hospitality, the operator of such brands as Heliot Steak House, Radio Rooftop and STK, posted same-store sales gains of 7.5%—compared to a 0.4% rise for Chili’s. Ark Restaurant Group reported a 2.3% same-store sales increase for the 38 restaurants, most of them one-offs, within its fold.


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