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IHOP reports best same-store sales in a decade

IHOP reports best same-store sales in a decade

Parent DineEquity develops new long-term vision for sister brand Applebee’s

IHOP’s domestic systemwide same-store sales increased 3.9 percent in 2014, the family-dining chain’s strongest results in a decade, parent company DineEquity Inc. said Wednesday.

Domestic same-store sales climbed 6.1 percent at IHOP during the fourth quarter ended Dec. 31, its highest quarterly increase since early 2004. IHOP said sales were positive across all dayparts.

Sister brand Applebee’s Grill & Bar also ended the year with positive momentum, especially toward the second half of the fourth quarter. Domestic systemwide same-store sales rose 2.8 percent in the fourth quarter, its highest increase since the second quarter of 2011. Domestic same-store sales rose 1.1 percent during the fiscal year.

DineEquity attributed the strong fourth quarter in part to increases in ad spending, as franchisees put more dollars into the advertising fund, said Julia Stewart, DineEquity chairman and CEO, in a call with analysts. Stewart did not indicate the amount of the increase.

The stronger macroeconomic environment and work the company is doing at both brands also helped. “It’s really a combination of everything,” she said.

IHOP redesigned its menu in 2013, prompting customers to buy more appetizers and higher-priced dishes. The chain has also tweaked advertising to enhance its overall value proposition. It has also focused on menu innovation, including the recent introduction of Criss-Croissant waffles, made with croissant dough.

Key to the turnaround, however, has been the company’s focus on improving restaurant operations. Stewart said DineEquity would continue to work with franchisees who don’t meet the improved operational standards.

Stewart said more work is needed at Applebee’s, which DineEquity acquired in 2007. Since then, the company has refranchised most of the chain’s 2,000 restaurants and rolled out a comprehensive remodeling plan.

But DineEquity “pushed the reset button” for the casual-dining chain in 2014, conducting extensive research into the brand, Stewart said.

The result is a new long-term vision for Applebee’s that will include more menu innovation, as well as further work on the brand’s value proposition, marketing mix and building bar business, Stewart said.

Results of those efforts will be seen in 2015, Stewart said. This week, for example, the chain launched a new platform of “Bar Snacks, Shareables and Pub Plates,” in various sizes and mix-and-match combinations, including Kobe-Style Meatballs, Sriracha Shrimp, Salsa Verde Brisket Nachos and Double-Crunch Bone-in Wings.

Stewart reiterated the company’s intention to acquire a third brand — either in a specialty segment or fast casual, so as not to compete with IHOP or Applebee’s. “Maybe it’s like a needle in a haystack,” she said. But the search for the right brand continues, although she said no deal is imminent.

DineEquity projected same-store sales to increase between 1 percent and 4 percent for Applebee’s and between 2 percent and 5 percent for IHOP in fiscal 2015.

Applebee’s franchisees are expected to open between 30 and 40 new restaurants in fiscal 2015, and IHOP franchisees and licensees are expected to open 50 to 60 units, both mostly domestic.

Fourth-quarter revenue increased 4 percent, to $164.4 million, compared with $157.9 million a year ago. For the year, revenue rose 2 percent, to $655 million, compared with $640.5 million in fiscal 2013.

The company reported a net loss of $22.4 million, or a loss of $1.18 per share, for the quarter, compared with income of $18.1 million, or 94 cents per share, a year ago.

Adjusting for the financial impact of a debt refinancing and other one-time charges, net income available to common stockholders was $21.9 million, or $1.16 per share, compared with adjusted income of $18.6 million, or 98 cents per share a year ago — an 18-percent increase.

For fiscal 2014, net income declined to $36.5 million, or $1.90 per share, compared with $72 million, or $3.70 per share, the prior year.

Adjusted net income rose 12 percent, to $89.6 million, or $4.73 per share, compared with $81.2 million, or $4.24 per share for fiscal 2013.

Applebee’s ended the year with 2,017 units, and IHOP ended the year with 1,650 locations.

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

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