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4Q sales improve at Applebee’s, IHOP

Higher checks offset traffic declines, DineEquity says

Revitalization efforts and higher checks boosted fourth-quarter sales at DineEquity’s Applebee’s and IHOP brands, despite declines in guest traffic, the company said Wednesday.

In a preview of results for the fourth quarter ended Dec. 31, DineEquity said a 2.1-percent price increase helped build check averages despite falling guest counts at the 2,000-unit Applebee’s Neighborhood Grill & Bar.

DineEquity also cited ongoing marketing initiatives and menu enhancements for a 2.9-percent increase in domestic systemwide same-store sales at Applebee’s for the fourth quarter. Same-store sales rose 3.4 percent at domestic franchise locations and 0.3 percent at domestic corporate locations.

For fiscal 2010, Applebee’s domestic systemwide same-store sales increased 0.3 percent. Domestic franchise locations reported a same-store sales increase of 0.6 percent for the year, but corporate locations in the U.S. saw same-store sales decrease 1.3 percent, DineEquity said.

At IHOP, the limited-time Fall Festival promotion along with Trick or Treat All-You-Can-Eat Pancakes contributed to a same-store sales increase of 1.1 percent among domestic locations systemwide. For the year, IHOP’s domestic systemwide same-store sales were flat.

DineEquity said it expects to book an $8 million charge in the fourth quarter related to the default of an IHOP franchisee, which the company would not name. Officials said the default was the result of business activities not related to the operator’s IHOP restaurants, and that the impacted restaurants are being sold to existing franchisees.

DineEquity said it has reduced its debt balance by about $78 million through the application of available cash as well as the ongoing sale of corporate locations in an effort to turn Applebee’s into a mostly franchised brand like IHOP.

In the first quarter of 2011, DineEquity completed the sale of 36 corporate Applebee’s units in the St. Louis area and parts of Illinois, which resulted in proceeds of about $25 million and reduced sale-leaseback-related obligations by $11 million. In 2010, the company sold 83 corporate Applebee’s locations.

By the end of February, the company expects to complete the sale of 30 corporate Applebee’s in the Washington, D.C., area, which is projected to bring in another $28 million and reduce lease obligations by about $20 million.

DineEquity said it has proposed a re-pricing of loan facilities for its debt of about $1.93 billion to take advantage of lower interest rates.

Full fourth quarter and year-end results are scheduled for release on March 3.

At the end of its third quarter, Glendale, Calif.-based DineEquity franchised or operated 2,001 Applebee’s restaurants and 1,476 IHOPs.

Contact Lisa Jennings at [email protected].

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