Amid mounting concern about the rise of the omicron variant of COVID-19, Dine Brands CEO John Peyton expressed confidence Thursday that the latest mutation would have little effect on the company’s performance.
The head of Applebee’s and IHOP pointed to the chains’ experience with the variant’s predecessor, delta, as evidence that Americans are simply getting used to living alongside the illness. Even as delta surged in places like Texas, Florida and Oklahoma over the summer, Peyton said, customers continued to visit the restaurants at a normal rate.
“I think we're on the verge of it becoming the current normal, right?” the CEO said during Barclays’ Eat, Sleep, Play Conference, according to a transcript from financial services site Sentieo. “Because it's looking more and more like it's not going away.”
The comments came after investors cooled on casual-dining stocks last week as news of omicron emerged. And to be sure, many of Dine’s casual-dining counterparts were not so immune to the effects of the delta variant. Cracker Barrel, Chili’s, Denny’s, Fogo de Chao and others reported a slowdown toward the end of the summer as a result of rising cases.
Meanwhile, researchers are still parsing out the details of omicron’s transferability and response to vaccines. But its emergence last week nonetheless spooked investors in publicly traded full-service restaurant companies, whose stocks fell an average of 3% the day after Thanksgiving.
It’s not that Dine isn’t taking the virus seriously. The company intends to follow federal guidelines around staff vaccinations when they emerge from the courts, Peyton said, and it has been “fanatical” about health and safety protocols throughout the pandemic. It’s the consumer, rather, who seems unfazed.
“Our conclusion is if, for whatever reason, someone chose not to become vaccinated, they also didn't choose to stay in their homes and hide,” he said. “I think what we're seeing is Americans are learning to live with it, and it's less and less of a headwind over time.”
Peyton shared a similarly positive view on the past year and a half, a period of immense challenges for casual-dining restaurants. Though his chains’ same-store sales plunged by as much as 50% in 2020, the pandemic forced them to establish an off-premise business that is still going strong, generating about $12,000 a week at each Applebee’s restaurant and $8,000 at IHOP. The company also trimmed its menus and invested in new technology, both of which have made operations more efficient.
“A lot of what we've learned during the pandemic and a lot of what was accelerated in terms of new consumer behavior is actually good for our business over the long term,” he said.
The company is doubling down on those changes with dedicated virtual brands at each chain, including the relaunch of Cosmic Wings at Applebee’s. And it’s getting ready to open new restaurants again after closing about 300 unprofitable stores over the past three years.
Omicron aside, COVID-19 was long ago replaced by labor, supply chain and inflation as the restaurant crises du jour. Those issues are keeping Peyton up at night, he said. And while he believes the problems are temporary, they are probably going to hang around for a while.
“I don't think it's a particularly short-term phenomenon,” he said. “I think we'll be experiencing this deep into 2022, and that's what we're planning for.”
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