IHOP added two more virtual brands to its portfolio during Q1 – TenderFix and Pardon My Cheesesteak. TenderFix, by “Stranger Things” actor Noah Schnapp in partnership with Nextbite, is a chicken tender concept that features both meat and plant-based options. Pardon My Cheesesteak, which focuses on cheesesteaks as the name suggests, was developed in partnership with sports podcast “Pardon My Take.” These two new virtual brands already exist in over 500 IHOP restaurants.
Interestingly, executives discussed these additions during parent company Dine Brands’ earnings call on the same day casual dining peer Brinker International announced it was sunsetting its virtual brand, Maggiano’s Italian Classics.
During Brinker’s call, CFO Joe Taylor said his company’s decision was based on “recognition of less demand for virtual brands in the post-COVID environment.” The shutdown will be completed by June and is expected to negatively impact year-over-year traffic by about 60 basis points. In August, Brinker CEO Kevin Hochman announced the company was going to “right-size the time and attention and investment” of its other virtual brand, It’s Just Wings, to fit its 6% sales mix contribution.
Dine Brands, however, seems to have a bit of a different perspective – at least as it applies to its IHOP brand.
“Virtual brands blossomed during the pandemic and like any launch of a new business opportunity, they’re going through a cycle,” Dine Brands CEO John Peyton said during an interview Wednesday. “And now, we’re learning and adjusting.”
Dine’s virtual strategy began in the throes of the pandemic in early 2021 with Applebee’s launch of Cosmic Wings. However, that concept was pared down earlier this year – though it remains an option for franchisees – after dine-in traffic started returning in droves. This trend doesn’t seem to be impacting sister chain IHOP in the same way. The brand launched launched Thrilled Cheese and Super Mega Dilla last year and they are now available in more than 1,200 restaurants.
At the time of the launch, the company’s approach was to target a certain demographic, target a daypart and create recipes that leverage equipment and SKUs that already existed.
“That still holds true, but what we’ve learned in addition to that is you have to have a good match of a business objective of that brand or brands and what that business needs,” Peyton said.
For IHOP, that means embracing dinner and late-night opportunities specifically. Fifty percent of IHOP’s virtual sales are between 11 p.m. and 5 a.m., for instance, “which is why [franchisees] want those hours,” Peyton said.
“It enhances their business strategy. If a restaurant is now doing that business with that base business at night, it encourages them to reopen and go back to the 24/7 hours they had pre-Covid with more confidence,” Peyton said.
Peyton added some more context to illustrate how IHOP might be benefitting from its virtual business, noting that the brand’s dinner business was up by 10% last quarter and overnight business was up 16%.
“We believe virtual brands are part of what’s propelling that business. They enable us to expand our reach and allow us to be top-of-mind for more customers,” he said. “We remain bullish on the opportunity virtual brands present.”
Contact Alicia Kelso at [email protected]