IHOP and Applebee’s Neighborhood Grill & Bar have started opening dining rooms in Georgia and Tennessee as restrictions are loosened in the wake of the COVID-19 pandemic.
Although just two-days in to the reopenings, management of parent company Dine Brands Global Inc., were fairly upbeat.
CEO Steve Joyce told Nation’s Restaurant News that the chains were following Tennessee’s regulations that limit occupancy to 50% of capacity, although traffic has been far too low for them to have to worry about that yet.
“It’ll be good when that’ll be an issue for us. It’s not an issue now,” he said.
He added that Applebee’s president John Cywinski told him that, of the guests who are choosing to eat in the dining room, “they’re all having a drink.”
“We’ve got everyone in masks and gloves. We’re directing [customers] in the parking lot so we don’t have people gathering there, either, or congregating at the opening. It’s pretty easy, because it’s literally just starting,” Joyce said.
He added that, with restaurants only capable of doing takeout and delivery since mid-March, he was pleasantly surprised that IHOP’s sales numbers were 25% of what they were a year ago and Applebee’s were at 35%.
“Our numbers have wildly exceeded where we thought we’d be,” he said; he'd hoped they might achieve 20% of the sales achieved a year ago..
Applebee’s had seen positive same-store sales in the quarter through March 8, at which point they were up by 3.2%, and IHOP’s were 0.6% down at that point, but, as expected, they were heavily impacted by the viral outbreak and the government-mandated dining room closures.
Same-store sales at Applebee’s were down by 10.6% for the quarter ended March 31, and IHOP's comps were down by 14.7%
Cywinski said in a conference call announcing quarterly results that about 60 restaurants in Georgia and Tennessee had opened their dining rooms, operating in accordance with state parameters and the chains’ own protocols, and that dine-in sales were incremental to existing off-premise sales, which remained steady over the two days.
He added that the staff at those restaurants were glad to be working again after having been furloughed in March.
“Our team members, perhaps surprisingly, are very enthusiastic coming back,” Cywinski said. “We have not had any issues whatsoever on that front.”
He said the chain’s franchisees would “apply best-practice learning before we begin a smart, measured and sequenced expansion in Texas, Oklahoma, Iowa, Utah, Alaska, North Dakota, Montana, Missouri, and as of this morning it appears Nebraska will be opening up as well.”
“It’s certainly conceivable we have more than 200 full-service restaurants open next week,” he added.
Joyce said both chains would continue to bring staff members back on board as business returned.
He said he didn’t know how long it would take for most customers to be comfortable eating in dining rooms again, but that franchisees would staff up accordingly.
“We do not have any insight into how quickly [attitudes will shift] and how sentiment changes and how soon we get back to a relatively normalized level in the restaurant,” he said.
IHOP president Jay Johns said that, even as dining rooms opened, the customer experience wouldn’t be the same as before the pandemic.
“We understand the restaurant industry will be impacted significantly coming out of this and the guest experience will be different,” he said. “We know it will not be business as usual pre-COVId-19, and going forward more than value will be top-of-mind with our guests.”
He said personal safety “will be up there with value and craveability” as a key consumer demand.
“Restaurants that offer the most reassurance will win when they reopen,” he said.
Joyce said that displays of health safety were prominent in the reopened dining rooms.
“We are going above and beyond to demonstrate visibly, and in reality, safety in the restaurants,” he said, including only bringing silverware and condiments to the table once guests are seated, food being brought directly from the kitchen, and spacing between tables to comply with social distancing requirements.
He said that as the dine-in business returned, the chains would move forward with plans that were underway before the pandemic to allow customers to order and pay on their own mobile devices, which before was an issue of convenience and now is also one of safety as guests don’t have to touch devices that aren’t their own.
Although most locations of both chains remained open for takeout and delivery after dining rooms were ordered to close, 251 of Applebee’s 1657 domestic locations closed in mid-March, and 175 of them remained closed at the end of April.
Johns said that around 80% of IHOP’s 1,841 restaurants remained open.
Same store sales at Applebee’s fell farther with each successive week of March, reaching a low point of -80.6% for the week ending March 29 before creeping back to -64.4% for the week ending April 26.
IHOP followed a similar path, with a low point of -84.6% for the week ending March, and -75.4% for the week ending April 26.
But off-premise sales grew in the 1st quarter, by 12.5% at Applebee’s and 15.7% at IHOP, and then surged in April by 121.6% at Applebee’s and 131.7% at IHOP.
Cywinski said he thought the government stimulus checks helped drive the improvement in April. He said most Applebee’s customers preferred curbside pickup over delivery, in part because they trust the Applebee’s brand and “they don’t have to worry about additional third-party handling”
“Plus, after a bit of prolonged cabin fever, I believe our guests really enjoy getting out of their homes and hopping in their cars for a little indulgent escape to their neighborhood Applebee’s. We’re seeing this across the country,” he added.
Net income for Dine Brands Global was $22.3 million, or $1.31 per share, for the quarter, down from $31.6 million, or $1.73 per share a year earlier.
Revenue was $204.9 million, down from $237.1 million in the first quarter of 2019.
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