IHOP flips into fast casual segment with new concept

Dive Brief:

IHOP will debut a new fast casual concept called Flip'd by IHOP in April 2020, with its first store slated to open in Atlanta, according to a press release. Flip'd will be a standalone brand within the IHOP portfolio, and sites in New York City, San Francisco, Denver and Washington, D.C. are also under consideration.
The fast casual concept will target to-go and delivery orders. Guests can order from a digital kiosk, directly at the counter or online for pickup or delivery. Catering also will be available.
The menu is inspired by IHOP favorites and will include a build-your-own pancake bar with mix-ins and toppings, egg combos and egg sandwiches, made-to-order breakfast burritos, Ultimate Sandwiches such as the Black Angus Steakburger and Buttermilk Crispy Chicken, a variety of coffee and juices and grab-and-go salads and wraps.

Dive Insight:

IHOP's aggressive growth plan includes new development, a focus on to-go and lunch/dinner expansion, according to the press release. The new fast casual concept will allow the company to hit two of these areas while also diversifying its portfolio into a new restaurant segment.

Fast casual spinoffs are becoming a popular growth strategy for casual dining brands, especially with the segment struggling with mediocre same-store sales. The Cheesecake Factory opened an Asian fast casual concept in February while Famous Dave’s launched its first fast casual restaurant in Tuscon, Arizona, in May. Cracker Barrel acquired fast casual breakfast restaurant Maple Street Biscuit Company for $36 million in October.

For IHOP, this new concept could also open up more metro sites since it will likely require less real estate than its full-service counterpart and allow it to test technologies like digital kiosks. The company has also been going big on delivery, and these fast casual restaurants will give it a better platform to reach more urban customers, who have historically ordered more delivery.

The fast casual concept could also give IHOP a competitive advantage in a crowded full-service diner segment, and staying open 24-hours like full-service diners may help against other fast casuals that close after dinner. Its menu of build-your-own pancakes also gives it a unique customer experience not necessarily available at Denny's or other full-service diners.

Building a strong delivery and to-go platform will also likely help the company grow sales. IHOP grew same-store revenue by 1.2% during Q3 2019, but its off-premise business grew 24% and made up over 9% of its total sales, a 200 basis point increase compared to the previous third quarter, IHOP president Jay Johns said during an October earnings call with investors. The company plans to grow its off-premise to make up 15% of sales and a concept focused on to-go and delivery will only help it further reach this goal.

The company has also been expanding into travel centers, signing its largest franchise agreement ever to open 94 units over five years with TravelCenters of America, and eyeing more international markets, including Pakistan, India and Peru. With so many different avenues for growth and a bigger focus on off-premise, it may only take a few quarters for the company to start to reap the benefits of stronger comp sales growth.