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DineEquity aims to ‘boldly change the story’ at Applebee’s

IHOP to begin remodeling program to maintain momentum

DineEquity Inc. chairman and CEO Julia Stewart pledged Wednesday to “boldly change the story” at Applebee’s after reporting that domestic systemwide fourth-quarter same-store sales fell 2.5 percent at the casual-dining chain.

Meanwhile, sister brand IHOP recorded a 1.4-percent increase in domestic systemwide same-store sales for the Dec. 31-ended fourth quarter, which was the 11th consecutive quarter of positive results for the family-dining chain.

Glendale, Calif.-based DineEquity is working with franchise operators to turn around negative sales and traffic at Applebee’s, although efforts are not likely to come to fruition until the second half of 2016, Stewart said.

“We need to be faster, bolder and think outside the box,” she said. “Applebee’s hasn’t done enough to differentiate itself and punch through the noisy, cluttered market.”

Efforts include a systemwide upgrade of operations, including better training of team members in both front and back of the house. The menu is being streamlined to improve kitchen consistency, and a new pipeline of menu offerings will be revealed in the spring, Stewart said.

Applebee’s will also launch a new marketing campaign that will spotlight the neighborhood grill and bar positioning in ways that “appeal to today’s lifestyle,” although Stewart declined to offer details for competitive reasons.

In December, Applebee’s chief operating officer Sanjiv Razdan said the chain was testing a new prototype design, as well as upgrades to the bar and enhanced use of technology.

Stewart said she was confident the efforts will show results.

“An enhanced guest experience, first and foremost, drives repeat traffic, so we have a pretty clear understanding of what we need to do differently,” she said.

IHOP, meanwhile, will begin a round of remodeling. About one-quarter of the chain’s 1,600 restaurants are expected to be remodeled this year.

McDonald’s Corp.’s expansion of breakfast all day has impacted IHOP, Stewart said, as well as “everyone else in the breakfast space.”

But IHOP has offered breakfast all day for 56 years, and Stewart said the opportunity is to capitalize on that consumer desire for pancakes at dinner with menu innovation and by looking for ways to create efficiency, like carside to-go service that allows diners to avoid waiting in a drive-thru line.

DineEquity has also been working toward more efficient operations overall with the consolidation of brand support centers at the Glendale headquarters, which Stewart said would drive better collaboration and synergies between the two brands.

The company is accelerating the pace of development for both brands domestically and internationally, looking for both traditional and nontraditional opportunities, she said. And DineEquity continues to explore a possible acquisition of a third brand, though there was no news on that front.

For the fourth quarter, net income was $25.4 million, or $1.35 per share, compared with a loss of $22.4 million, or loss of $1.18 per share, a year ago. Adjusting for a 53-week year in 2015 and other one-time charges, net income was $29.5 million, or $1.59 per share, compared with $21.9 million, or $1.16 per share, a year ago.

Revenues increased about 4 percent, to $171.3 million. for the quarter.

For the fiscal year, net income was $104.9 million, or $5.52 per share, compared with $36.5 million, or $1.90 a year ago. Adjusted net income was $116.1 million, or $6.19 per share, compared with $89.6 million, or $4.73 per share in fiscal 2014. Revenues rose nearly 4 percent, to $681.1 million.

Domestic systemwide same-store sales for the year rose 0.2 percent at Applebee’s and increased 4.5 percent at IHOP.

In guidance for fiscal 2016, DineEquity expects domestic same-store sales to range between negative 2 percent and positive 2 percent at Applebee’s, and to increase between 1 percent and 4 percent at IHOP.

Applebee’s franchise operators are expected to develop between 35 to 45 new restaurants in 2016. IHOP is expected to add between 60 and 70 new restaurants. For both brands, most of that growth will be domestic.

DineEquity ended the year with 2,020 Applebee’s units and 1,645 IHOP restaurants. For both brands, all are franchised except 11 company-owned IHOP units.

Contact Lisa Jennings at [email protected].
Follow her on Twitter: @livetodineout

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