Heading into 2019, off-premise sales, acquisitions, and more monthly drink and food promotions to boost traffic are top of mind for Dine Brands Global, the owner of Applebee’s and IHOP.
Like many other brands, Applebee’s and IHOP both reported strong gains in their off-premise business in the third quarter, which boosted overall store sales. Combined, profits on to-go orders increased 37 percent for the companies for the period ending in September. That growth has also resulted in higher average check sizes of more than 30 percent, CEO Stephen Joyce told an audience of investors at the annual Barclays Eat, Sleep, Play Conference, Tuesday.
While he touts the chains’ innovation efforts in launching individual mobile apps and delivery services last year, packaging––particularly at IHOP––has kept customers coming back. The containers used are insulated and designed to keep food intact for 45 minutes.
“That’s important because delivery can take up until that amount of time,” Joyce said. Off Premise now accounts for 10 percent of Applebee’s current business sales and 7 percent of IHOP’s.
Marketing to Millennials
Millennials may be credited, by some, as to bringing about the end of casual dining. But the demographic accounts for nearly half of IHOP’s total sales and roughly 35 percent of Applebee’s, Joyce added.
A big reason for this is stress. According to Dine Brands, 65 percent of consumers crave comfort food when they are overwhelmed, and according to Joyce, 90 percent of Americans have never been more burdened than they are today. All of this to say, both Applebee’s and IHOP know who their primary audience is, and it’s not upscale diners.
Further attracting customers to Applebee’s and IHOP are the monthly promotions the brands deploy. Applebee’s Dollarita and Dollar Zombie cocktail beverages were critical in the chain raising comparable-store sales by 7.7 percent last quarter. Applebee’s has now launched its new Dollar Jolly drink for December.
“About 93 percent of the people that buy these drinks, also eat food. So they are profitable customers, which has led to franchisee’s support of program,” said Joyce, adding that while the company does break even on drinks, “it drives traffic and people like talking about it on social media.”
IHOP knows all about social media. It too is running limited time monthly offers for customers, including Grinch ‘s Green Pancakes this month. The chain, however, is most remembered for flirting with changing its name to the International House of Burgers (IHOB) in June. One tweet led to 44 billion impressions on Twitter and more than 22,000 news articles, according to Joyce.
“We got death threats,” he said.
In the end, the marketing campaign, a total hoax, did its job. Burger sales quadrupled in the lunch and dinner dayparts for IHOP in the third quarter, exactly what the company was gunning for. Same-store sales grew 1.3 percent overall for the restaurant over the period.
Still Looking to Buy Another Chain
Dine Brands had nothing to announce to investors on the M&A front, but is involved in active discussions, according to Joyce. During his four-year tenure as CEO of Choice Hotels International, ending in 2012, he grew the company from nine to 13 brands.
“There is plenty of opportunity to add brands,” he said. “But we want to start small, and are looking at categories we are not in, such as fast casual and QSR.”
The market is also more expensive than Dine Brands anticipated, Joyce added. But the company is more willing to over pay for a chain with a smaller footprint than one with 500-plus locations so that they can scale it in-house.
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