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Applebee’s poised for ‘game-changing’ brand reinvention

IHOP may soon offer delivery by third-party service, parent company says

Applebee’s is preparing a “game-changing” brand reinvention this year, while sister brand IHOP may soon offer delivery, parent company DineEquity Inc. said Thursday.

Details of the new initiatives were not fully revealed in a call with analysts following first-quarter earnings from the Glendale, Calif.-based operator. But Julia Stewart, DineEquity chairman and CEO, said the moves would reverse the downward sales trajectory at Applebee’s and build on momentum at IHOP.

For the first quarter ended March 31, same-store sales at Applebee’s domestic units sytemwide declined 3.7 percent. 

At IHOP, domestic same-store sales grew 1.5 percent, lapping a 4.8-percent increase in the first quarter a year ago.

The centerpiece of Applebee’s revamp will be a transformative menu overhaul supported by a massive marketing campaign, but Stewart declined to give specifics.

“All will not roll out immediately, but it will be a game-changing year for Applebee’s,” Stewart said. “We are going to significantly change the perception of the Applebee’s brand.”

The moves have been tested in some restaurants in New England, she said, which was the only region to show positive results for Applebee’s in the first quarter.

Although the brand attempted a turnaround last year, Stewart said efforts were simply not big or bold enough.

“We need to do a lot more in bigger and bolder, and that’s what you’ll see more of,” she said. “From a consumer perspective, there’s a sea of sameness in casual dining, and we’re working to change that.”

IHOP, meanwhile, has outperformed competitors in the family-dining segment for seven consecutive quarters, Stewart said, citing unspecified industry data.

The brand showed particular strength at breakfast, but sales fell at lunch and dinner, providing an opportunity for improvement. 

A new menu to debut on May 16 will emphasize the customizability of IHOP’s offerings, Stewart said. And the chain is looking to expand occasions, building traffic during nontraditional dayparts and off-premise sales.

For instance, Stewart said IHOP is building a relationship with an unnamed third-party delivery provider.

As competition at breakfast continues to grow, IHOP is also looking to leverage its strength as a fully customizable morning meal specialist.

Customers can have eggs made to order any way they want at IHOP — scrambled, fried or poached. “You can’t have that in QSR,” Stewart said.

Both brands will roll out a systemwide remodel this year that for Applebee’s is expected to reach about 300 units in the U.S., and for IHOP will reach about a quarter of domestic restaurants, Stewart said.

Applebee’s is still in the process of finalizing the remodeling package for franchisees, which will include everything from seating to restrooms. The new look is designed to signal big changes at the grill-and-bar brand coming this year, including some initiatives already in place.

Earlier this year, Applebee’s rolled out a new mobile app that allows customers to pay ahead, a move designed to enhance carside-to-go business.

And the chain has undergone what Stewart described as the most ambitious retraining program in the brand’s history, including both front-of-house and back-of-house staff, with the goal of improving customer service.

For the quarter, DineEquity reported net income of $25.5 million, or $1.37 per share, compared with $28.4 million, or $1.47 per share, a year ago.

Adjusting for the sale of the remaining company-owned Applebee’s in the third quarter of 2015, adjusted net income available to common stockholders was $29.1 million, or $1.58 per share, compared with $31.1 million, or $1.64 per share, the prior year. 

The company blamed the decline on higher general-and-administrative expenses due to non-recurring costs associated with the consolidation of the restaurant support center and personnel costs for travel.

Revenue was $163.5 million, compared with $175.8 million the prior year.

DineEquity ended the quarter with 2,030 fully franchised Applebee’s restaurants and 1,683 mostly franchised IHOP units.

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

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