Dive Brief:

• Sun Holdings subsidiary Suncakes LLC has acquired 41 out of 49 IHOP locations from CFRA Holdings, according to a press release Thursday. CFRA filed for Chapter 11 bankruptcy protection in May, closing its 49 IHOP locations. While financial details of the Suncakes deal were not disclosed, IHOP's parent company Dine Brands received $4.6 million as part of the transaction, which represents a complete recovery in fees.
• Sun Holdings, owned by Guillermo Perales, has one of the largest restaurant franchisee portfolios in the country, with more than 1,000 locations covering brands from Arby's and Burger King to Cicis Pizza and McAlister's Deli.
• IHOP, like many of its casual dining peers, has a long road to recovery from the COVID-19 crisis, particularly with dine-in restrictions lingering and breakfast sales remaining down. But there is optimism surrounding the company’s progress. In late July, for example, Dine Brands exceeded Q2 expectations, with IHOP improving its sales sequentially from negative 81.5% to negative 34.4% over 12 weeks. 

Dive Insight:

Much of IHOP's improvement has come from the chain's growth in online to-go sales, which represented roughly 35% of total sales, while off-premise sales overall represented about 54% of its total sales. Off-premise strength is critical now as dining rooms remain at limited capacity across much of the country and as a second wave of COVID-19 looms. IHOP has leaned into to-go, curbside and delivery orders, and off-premise comp sales for Q2 were up by 145% accordingly, primarily driven by traffic, President Jay Johns noted during the Q2 earnings call. 

"With more people generally staying at home, I'm pleased to report continued strong growth in our off-premise business even as dining rooms started to reopen," he said. "We believe our collective on-premise initiatives will continue to drive sustainable growth as more people are utilizing to-go now than before the pandemic. As a result, a wider range of guests are familiar with the ease and convenience of having their favorite IHOP meals to pick up or be delivered."

It’s also worth noting that IHOP could also get a post-pandemic boost from its smaller, off-premise-focused concept Flip'd, which Dine Brands was planning to expand this year before the pandemic. Johns also said during the Q2 call that the chain has new opportunity to increase market share as independents close permanently.

Notably, the chain's franchisees opened 13 restaurants in the first half of the year, despite the challenges wrought by the pandemic, suggesting that CFRA's challenges weren't felt as sharply by the parent company. 

If progress is to continue for those 41 franchised locations, Sun Holdings seems like the right operator to make it happen. The company not only has extensive restaurant experience, owner Perales has also won a number of awards for his work, according to the press release. 

Sun's investment also shows a degree of confidence in the parent company to right the ship. A number of restaurant brands and franchisees have filed for bankruptcy this year amid the pandemic, and some aren't likely to get the same lifeline in this environment. An auction for California Pizza Kitchen, for example, was canceled after no qualified bidders showed interest.