Dive Brief:
- Dine Brands teased the possibility of bringing dual-branded IHOP/Applebee’s units to the U.S. on the company’s Q4 2023 earnings call Wednesday. The company recently opened its eighth such store last month in Leone, Mexico.
- Applebee’s unit count fell 2% in 2023. Franchisees closed 46 stores, which combined with unit openings, resulted in a net decrease of 36 units.
- In addition to the potential dual-branded units, Applebee’s is focused on “developing a prototype with an ROI that will return the brand to net unit openings,” Dine Brands CEO John Peyton said on the call. The brand has faced escalating development costs and slumping same-store sales.
Dive Insight:
Applebee’s president Tony Moralejo said the closures this year were within the normal range for a mature brand, which he estimated at between 1% and 2%.
“These closures aren’t a sign of struggling franchisees,” Moralejo said. “They are offering a sign of struggling trade areas.”
Applebee’s domestic same-restaurant sales have fallen for three straight quarters, according to the company’s 10-K, and were down half a percent in Q4 compared to the year-ago period. This trend was driven by a slide in traffic, which growing check sizes failed to offset.
The strength of sales at the dual-branded stores in several markets indicate the concept could help offset slumping traffic, Peyton said.
“The revenues for the same size box as one brand or the other is two times or more what it was before,” Peyton said. “With the two brands, we can address all four day parts and that is a big innovation... our intent is to eventually bring [it] to the U.S. when we find the right opportunity to introduce it.”
The dual-brand units consist of a unified back-of house with a “combined and blended front of house” for both brands, Peyton said on the call. In an interview with Nation’s Restaurant News, Peyton said the dual units would have discrete entrances but customers can move between branded sections.
