Applebee’s has long prided itself on offering customers a good deal. In August, guests could get as many chicken wings as they wanted for a flat rate of $12.99. In October, the chain brought back $1 margaritas for the first time since 2020. As the chain’s website says: “When one promotion ends, another always begins.”
The promotions are intended to grab the attention of value-hungry consumers. And Applebee’s executives say they’re doing just that. “Both programs drove traffic as we hoped when we ran them,” Dine Brands CEO John Peyton said in an interview. “It’s driving traffic and it’s meeting our guests where they want and it’s meeting their needs.”
Yet for the second straight quarter, Applebee’s value promotions did not translate to sales and traffic growth. The chain’s same-store sales fell 2.4% year over year in Q3 on 4% higher prices.
Executives blamed the decline on difficult comparisons to a year ago, when comps rose 3.8%. And they noted that underlying trends were stable: Applebee’s average check size didn’t change and average weekly sales continued to exceed 2019 levels.
Applebee’s has no intention of abandoning its position as a value brand. Offers like the Dollarita have proven successful at drawing in younger people and new customers and generating buzz. But it is also looking at other avenues for growth. “We're focused on innovation in multiple areas” to help drive sales, Applebee’s President Tony Moralejo told analysts Wednesday.
One big area will be the menu. In September, Applebee’s hired Shannon Johnson as VP of culinary to spearhead menu innovation, an area the brand believes “we can do more and we can do better,” Peyton said.
Johnson, who was part of Applebee’s culinary team from 2003 to 2012, has already created more than 200 new menu items that are being tested with consumers and franchisees. Some of them will make their way to the core menu, Peyton said.
Applebee’s may be following a blueprint established by sister brand IHOP, which has had a lot of success with menu innovation this year. In March, it unveiled its biggest menu update in years, featuring chef-driven eggs Benedicts, crepes and an old fan favorite, Cinn-A-Stack pancakes. This summer, it introduced pancake tacos, biscuits and new waffle options, including Nashville hot chicken and waffles. The revamp was led by new VP of Culinary Art Carl, and President Jay Johns credited them for driving same-store sales growth of 2% in IHOP’s third quarter.
Applebee’s will take another page from IHOP’s book by rolling out a new POS system next year, a major overhaul that will equip servers with digital ordering tablets for the first time. Peyton said the move will be “transformative” for both employees and customers. Also on the tech front, Applebee’s is developing a new website and mobile app.
It’s also looking at its restaurants. A new Applebee’s prototype has been in the works for a while, and it also plans to launch a reimaging program for older stores later this year. “A lot of our restaurants are over 20 years old, and so they need to evolve and they need to be renovated,” Moralejo said.
In total, Dine executives mentioned “innovation” more than a dozen times on Wednesday’s earnings call. But Peyton said the topic is always top of mind.
“Brands that don’t innovate don’t survive,” he said. “Whether it’s in hospitality or restaurants like ours, sneakers, retail you name it. … Innovation is in our DNA, and it has to be.”
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