Dive Brief:

• IHOP’s same-store sales fell 1.7% year over year, and Applebee’s same-store sales declined by 4.6%, Dine Brands said in its earnings release on Wednesday.
• IHOP’s sales decline was driven by a combination of bad weather and the cessation of sales for three virtual brands developed by Nextbite — Thrilled Cheese, Super Mega Dilla and TenderFix — the company said on its Q1 2024 earnings call. IHOP added the brands across its stores in 2022 and early 2023 before Nextbite shuttered in Q2 2023. 
• Applebee’s decrease in same-store sales was primarily fueled by falling traffic, Dine Brands CEO John Peyton said in an interview with Restaurant Dive. In particular, consumers earning under $50,000 annually pulled back on visits, and when they did visit they sought to reduce their checks.

Dive Insight:

A combination of check management and a strong promotional calendar lifted the percentage of orders at Applebee’s that included promotional items or LTOs from about 19% in the prior year and prior quarter to about 28% in Q1, Peyton said on the company’s earnings call. Overall, Applebee’s sales have fallen for four consecutive quarters.

Still, Applebee’s sales improved sequentially throughout the quarter, according to the earnings call. Peyton said $0.50 boneless wings and other promotions drove Applebee’s sales above Black Box’s family dining benchmark for five weeks.

The end of IHOP’s three Nextbite brands contributed to that brand’s sales decline, though the ongoing deployment of Virtual Dining Concept’s MLB Ballpark Bites Presented by Mastercard and NASCAR Refuel Tenders & Burgers and the expansion of Pardon My Cheesesteak offset some of the negative impact. In Q1 2023, these brands accounted for about 1.5% of IHOP’s sales, Peyton said.

Nextbite was one of the major virtual brand platforms to suffer serious difficulties last year. The company went through several rounds of layoffs, then sold itself piecemeal to C3 founder Sam Nazarian and UrbanPiper. At the time, Nazarian said the main value of Nextbite was in its partnerships with legacy brands like IHOP. 

Promotions will feature prominently in Applebee’s effort to draw traffic in Q2, the company said on Dine’s earnings call. The brand recently relaunched its Dollarita offer, paired with a new appetizer, Chicken & Bacon Loaded Fries. IHOP, meanwhile, is focusing on the expansion of its Virtual Dining Concept brands following major promotions in Q1, namely the return of the Rooty Tooty Fresh ‘n Fruity, and its pancake of the month club. 

Casual dining brands have faced a difficult quarter, with First Watch reporting a 4.5% drop and Bloomin’ Brands recording a 1.6% dip. This, combined with the sharp fall for Applebee’s, indicates the trouble with sales and traffic from recent quarters continues in the sector.