Dive Brief:
- Dine Brands will transform an IHOP in Seguin, Texas, a suburb of San Antonio, into its first domestic dual-branded IHOP-Applebee’s unit in Q1 2025, according to a statement emailed to Restaurant Dive.
- The company has 15 sites targeted in the U.S. for dual-branded development, with roughly a dozen expected to open next year, John Peyton, Dine’s CEO, said on the brand’s earnings call.
- Outside of the U.S., Dine has 13 dual-branded stores, which typically bring in 1.5 to two times the sales of a single-branded store. This strategy could help drive sales lifts, especially as Applebee’s and IHOP’s comparable sales fell 5.9% and 2.1%, respectively during the third quarter.
Dive Insight:
Peyton said in a statement that dual-branded stores allow Dine to leverage the relative strengths of both brands. Other restaurant companies, like Fat Brands and GoTo Foods (formerly Focus Brands), have looked to co-branding of compatible concepts as a way to boost unit sales.
“It allows IHOP to shine in the morning and Applebee's to thrive in afternoons and evenings,” Peyton said. “The menu leverages each brand’s unique offerings to maximize dayparts and provide more choices, variety, and value to guests.”
Dine is developing the first U.S. dual-branded store in partnership with the R. Hakim Group, one of its franchisees. The unit will close for renovations on Nov. 10, and reopen in Q1 2025, according to the statement.
Peyton said the dual-branded concept’s ultimate strength is not necessarily its appeal to consumers.
“It's really a B-to-B product in the sense that it’s got complimentary dayparts, a shared kitchen, a common menu, cross-trained staff,” Peyton said on the earnings call. These could help stave off closure for some challenged restaurants, Peyton said, because the addition of a second brand may improve unit economics.
It also could allow its developers additional opportunities if their territories don’t allow for room to add another brand, he said.
The dual-brand option could slow, or reverse, the gradual erosion of unit counts at Dine. Both IHOP and Applebee’s are expected to see net unit shrinkage this year, according to the earnings release.
Applebee’s should benefit more in the near term, Peyton said, as most of the sites identified for dual-branded conversions are operating as IHOPs already.
Outside of the dual-branded gambit, Dine is pursuing shorter-term solutions to its sales and traffic problems at its flagship brands. Peyton said that some of the sales weakness at Dine was caused by lapping strong promotions, namely all-you-can-eat-wings at Applebee’s and the all-you-can-eat pancakes and kids eat free at IHOP, but that the comparable decreases are still a concern.
Dine Brand's same-store sales Q1 2023 through Q3 2024
To counteract that, Applebee’s has partnered with the NFL for a series promotions and launched a $9.99 burger-and-fries time-limited deal reminiscent of Chili’s Big Smasher Burger.
Tony Moralejo, Applebee’s brand president, said the results indicate that the brand needed to overhaul its approach to value.
“We can no longer rely on what worked so well for us in the past,” Moralejo said.
The brand is building an “integrated value platform,” Moralejo said, which could “kickstart a new cycle of traffic, of sales growth for the entire Applebee's system.”
For a look at what that might mean, Peyton teased the upcoming launch of “our Real Big Meal deal … which will include the choice of a new big entree or a fan favorite and a beverage at an attractive price point.”
At IHOP, Dine is looking towards menu innovation to drive sales, Peyton said, with the September launch of Anytime Tacos, and update to parts of its menu, including breakfast burritos.
