DineEquity Inc. upgraded its fiscal 2015 guidance for IHOP on Wednesday after reporting the strongest quarterly sales increase for the family-dining brand in more than a decade.
IHOP’s domestic systemwide same-store sales climbed 6.2 percent for the June 30-ended second quarter, chalking up a two-year increase of 9 percent.
As a result, the company now expects same-store sales for the year to increase between 4 percent and 6 percent at IHOP. Earlier projections were for an increase between 2 percent and 5 percent.
Sister brand Applebee’s, however, reported a more modest 1-percent increase in domestic systemwide same-store sales for the second quarter, and company officials said there is more work to be done to achieve the same momentum seen at IHOP. The company’s guidance for the casual-dining brand was pulled back slightly.
At Applebee’s, the company expects same-store sales for the year to range between 1 percent and 3 percent, compared with earlier projections between 1 percent and 4 percent.
Julia Stewart, chair and CEO of Glendale, Calif.-based DineEquity, said the company remains laser-focused on strategic priorities for both brands, including improving the food and menu, honing the guest experience and working on marketing.
“It was another stellar quarter for DineEquity, reflecting strong financial discipline and the successful execution of our strategic priorities,” said Stewart, noting that both Applebee’s and IHOP led their respective categories in this year’s Top 100 census by Nation’s Restaurant News in terms of U.S. systemwide sales.
For IHOP it was the ninth consecutive quarter of positive sales.
Stewart credited promotions of the Summer Stacks pancakes and the return of Brioche French Toast, along with a new menu design rolled out in June that emphasized food freshness and included more photos.
During the quarter, IHOP also rolled out a new smiley logo — the first logo update in more than two decades — and a related “Summer of Smiles” marketing campaign that included the brand’s 57th anniversary celebration on July 7 with the offer of a short stack of pancakes for 57 cents.
Marketing during the quarter also focused on IHOP’s breakfast-all-day menu. “Seventy percent of Americans wish restaurants would serve breakfast all day long,” said Stewart. “IHOP has been doing that for almost 57 years.”
Breakfast now accounts for more than 60 percent of total sales across all dayparts at IHOP, she added.
Stewart said key learnings from IHOP will be applied at Applebee’s as the company works to increase guest frequency at the casual-dining brand.
At Applebee’s, the company continues to work on the menu to become a “more modern grill and bar,” Stewart said.
The Pub Diet rolled out earlier this year, featuring better-for-you bar-and-grill classics, has been well received and the company has since added a sandwich and handhelds menu platform along with new appetizers that were promoted with free giveaways in July.
The company is working on improving service speed and efficiencies, as well as creating energy and excitement at the bar, said Stewart.
Though the chain has seen positive results, true change takes time, she said.
“It’s not the kind of thing that happens overnight,” said Stewart. “It’s really a function of changing perceptions and getting people to come back more often and focusing on inside the four walls.”
The consumer environment remains “lumpy and bumpy,” said Stewart, and consumers also have greater expectations than ever before.
A focus on domestic growth
Unlike casual-dining competitors that have focused on aggressive discounting, Applebee’s has remained committed to everyday value, she said. “Discounting doesn’t pay and franchisees don’t make money,” she said. “It denigrates the brand. We’re very much into organic price value that can be done every day.”
Stewart said the company is looking to spark more domestic growth for both brands.
The company recently hired former InterContinental Hotels Group development executive Jim Anhut as senior vice president of development for both IHOP and Applebee’s. Anhut is charged with building on the design and new prototype opportunities for franchisees of both brands.
At the end of 2013, DineEquity hired Daniel Del Olmo as president of international, who is leading the growth of both brands overseas.
Net income for the quarter was up 40 percent to $26.5 million, or $1.40 per diluted share, compared with $18.9 million, or $1 per diluted share, a year ago.
Adjusting for special charges, net income was $28.9 million, or $1.53 per diluted share.
Revenues grew by 7 percent to $171.5 million, compared with $160.5 million a year ago.
DineEquity ended the quarter with 2,013 all-franchised Applebee’s locations, and 1,651 IHOP restaurants, which are almost all franchise operated.
Contact Lisa Jennings at [email protected].
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