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“The renaissance is here,” CEO John Peyton told investors, referring to his prediction in last quarter’s call of a rebirth of the restaurant industry.

Off-premise sales remain strong at IHOP and Applebee’s as dining rooms reopen

Parent company Dine Brands Global Inc. is still eyeing acquisition targets

Takeout and delivery are here to stay at full-service restaurants, according to the parent of Applebee’s Neighborhood Grill & Bar and IHOP.

Glendale, Calif.-based Dine Brands Global Inc., in reporting its performance for the first quarter of 2021, ended March 31, said that off-premise sales accounted for 36.7% of the sales mix at Applebee’s and 33.3% at IHOP, even as 99% of the chains’ restaurants have opened and guests have returned to dining rooms.

“The renaissance is here,” CEO John Peyton told investors, referring to his prediction in last quarter’s call of a rebirth of the restaurant industry.

“Americans, now that they are increasingly vaccinated, with capacity restrictions being lifted across the country, with good weather, with a strong economy, people are returning to restaurants,” he told Nation’s Restaurant News after the earnings call. “And it's because they want to gather and celebrate community and literally hug each other again, because we haven't done that for 13 months.”

He also said Dine Brands was still shopping for another concept.

Peyton told investors that the improvement in sales at Applebee’s and IHOP also was driven by historically high consumer savings and federal stimulus checks as well as unemployment rates that are at their lowest level since the pandemic started. Sales might be buoyed further if a new federal infrastructure bill is passed, he said.

As the country was largely shut down for the last two weeks of March 2020 in response to the novel coronavirus pandemic, sales at both casual-dining Applebee’s and family-dining IHOP cratered, but this March they recovered and then some, with Applebee’s and IHOP seeing a 103.3% and 81.2% increase, respectively, in same-store sales for March. For the quarter, Applebee’s comps were up by 11.9% while IHOP’s were down by 0.9%.

Applebee’s out-performed the casual-dining sector as a whole, according to Black Box Intelligence, Applebee’s president John Cywinski noted.

IHOP president Jay Johns indicated that his chain’s slower recovery compared to Applebee’s was attributable to continued slow traffic at breakfast, which has been affected by many people continuing to work from home, and therefore not going out for their morning meal.

However, moves to promote the afternoon and evening dayparts have been successful, Johns said, with traffic from 2 p.m. to 10 p.m. getting a boost from the chain’s IHOPPY Hour promotion that offers $5 entrées, $3 snacks and sides, and drinks for $1-$1.50 during that time. He said traffic is now two to three times higher during that time of day compared to when the IHOPPY Hour was launched in September, contributing to a low- to mid-single digit increase in sales for the entire day.

He said IHOP’s introduction of burritos and bowls and the limited-time Bacon Obsession menu cemented IHOP’s reputation as a breakfast leader while also gaining traction during the rest of the day. Johns said burritos and bowls are now in 8%-10% of total orders.

The portability of burritos and bowls also have been a factor in their success as off-premise sales at IHOP were a third of total sales during the quarter — the same percentage as in the previous quarter, even as dining-rooms sales rose.

“We've seen a steady increase in net off-premise sales in dollars,” he said, with 16.8% of sales being takeout and 16.4% being delivery.

That compares to around 10% of the business before the pandemic.

“We continue to believe that sustaining off-premise sales mix at a much higher rate is feasible in a post-pandemic environment and will strongly complement the anticipated return of our dine-in business,” he said, adding that, thanks to improved takeout and delivery capabilities, March 2021 off-premise sales were higher than when dining rooms were completely closed at the height of the shutdown.

Johns also said that IHOP’s fast-casual concept Flip’d by IHOP, would resume development after being put on pause by the pandemic, although Peyton said no date had been set for the first location.

Applebee’s off-premise business as a percentage of total sales slipped a bit in March and April. For the January-to-March period, it was 36.7%, but in March and April it was 33% as dining-room business improved. For those two months, 20% of sales were takeout and 13% were delivery, including an average of $330 per week from Cosmic Wings, the 10-week old virtual brand.

In terms of sales, however, off-premise sales have been steady while dining-room sales increased.

Total off-premise sales at Applebee’s averaged $17,000-$18,000 per week in March and April.

Cosmic Wings was launched with Uber Eats as the exclusive third-party delivery service, but Postmates is being added this week and the largest third-party player, DoorDash, will be added later this month, Cywinski said, which would likely boost sales of the virtual brand.  

Peyton told NRN that off-premise sales would continue to be a sales driver for both brands.

“What I love about it is that Applebee's and IHOP are now part of the off-premise consideration set in a way that they weren't before,” he said.

Peyton indicated that other virtual brands could be launched as well. Although he declined to elaborate, “I will tell you that I believe that there's an opportunity for us to leverage more than one virtual brand, and so we're exploring additional opportunities, but nothing firm to announce right now,” he told NRN.

He also said the idea of acquiring other brands, something his predecessor Steve Joyce had discussed, was still on the table.

“What I would say at this point is we're in this pivot moment from playing a lot of defense during the last 13 months to getting more aggressive about our growth strategy,” he told NRN. “We’ll begin to look at opportunities like that. We have no firm deadline for acquiring a brand but it's part of the palette to look at for opportunities for growth.”

He did say that any chain Dine Brands might acquire would likely be of a couple hundred units in a segment outside of casual dining and family dining that would appeal to existing franchisees and have cost synergies with Dine Brands’ existing infrastructure.

Eight IHOP units and two Applebee’s restaurant opened during the quarter, closing out the three-month period with 1,697 Applebee’s and 1,720 IHOPs.

That’s still down from the first quarter of last year, when there were 1,766 Applebee’s and 1,821 IHOPs.

The company reported net income of $25.6 million, or $1.51 per share, on revenue of $204.2 million, for the quarter.

Contact Bret Thorn at [email protected] 

Follow him on Twitter: @foodwriterdiary

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