Applebee's CEO: Death of Casual Dining is 'False News'
We’ve seen the headlines:
“Applebee’s Deserves to Die”— Eater.
“Millennials are Killing Chains like Buffalo Wild Wings and Applebee’s.” — Business Insider.
Dine Brands CEO Stephen Joyce’s response: Fake news.
“I'd like to put to rest false news about the death of casual family dining and the abandonment by millennials of the categories,” he said during a May 2 conference call.
Not only have millennials failed to stymie the brand’s progress, Joyce said, they’re actually driving its growth. About half of Applebee’s guests are under the age of 34. “And the last time I looked, those are millennials,” Joyce said.
In fact, according to Applebee’s data, only 26.4 percent of its current traffic hails from Baby Boomers, the generation credited by many pundits as Applebee’s saving grace. Twenty-nine percent are millennials, 28.3 percent Gen X, and 15 percent Gen Z.
Whatever or whoever is driving the results, however, Dine Brands was pleased with its first quarter figures to start fiscal 2018. Applebee’s domestic systemwide comparable same-store sales increased 3.3 percent versus the prior-year period (a 7.9 percent decline in Q1 2017). This was the chain’s highest quarterly comp sales increase since the first quarter of 2011. It was also the second consecutive quarter of positive sales and traffic for Applebee’s. Over the past six months, Applebee’s has enjoyed its best sustained traffic performance in more than a decade.
“The brand has made great strides over the last 12 months and we believe the reasonable momentum at Applebee's is sustainable for several reasons,” Joyce said.
In the last quarter, which closed fiscal 2017 with a 1.3 percent comps lift in Q4, DineEquity revealed its swap to Dine Brands Global, Inc. and unveiled a host of changes. Among them was a nearly across-the-board leadership overhaul that included 10 major executive changes. Applebee’s president John Cywinski joined the brand in March, leaving his post as executive vice president of Brinker International, the parent company of Chili’s and Maggiano’s Little Italy. Joyce, the former chief executive officer of Choice Hotels, stepped into his role in September. Other changes included: Greg Bever as SVP and chief people officer; Steve Levigne as VP consumer insights; Joel Yashinsky as SVP, chief marketing officer; Kevin Carroll as SVP, operations; Stephen Bulgarelli as chief culinary officer; Brad Haley as CMO of IHOP; Carrie Stojack as VP consumer insights; and Nevielle Panthaky as chief culinary officer.
Joyce said it’s all centered on an approach to be bolder in Dine Brands’ “go-forward strategy.”
A strategic pillar in the process is the evolution of Applebee’s off-premise business, which accounts for 9 percent of total sales at the chain, with a target of double by 2022.
“We know that meeting the convenience needs of consumers can influence their dinning decisions. Our off-premise strategy includes effective communication of our complete value proposition,” he said. “We can find value as much more than just a price point—it's everything that's against experiences across the dinning spectrum including convenience. This part of our business is highly incremental.”
Closing underperforming locations is also part of this fix. Applebee’s shuttered 22 domestic and four franchise units in the quarter, good for a net reduction of 24 franchises. Two international units also opened in Q1, bringing the total store count to 1,912 (1,760 domestic).
Joyce said Applebee’s growth will stabilize gradually and Dine Brands hopes to return to unit growth toward the end of 2019.
Unlike in the past, Joyce added, Dine Brands isn’t making decisions without concrete data. “Our brand specific consumer insights teams had made meaningful progress on developing our best-in-class analytics capabilities,” he said. “This is critical to providing essential customer information to support our decision making.”
Dine Brands also plans to invest in talent through the creation of the Dine Research Institute. Its goal is to invest in data science to connect brand sentiment and guest conversations to actual results, Joyce said. So far, the company has been able to go back and crack multiple years of guest feedback and sales data related to Applebee’s and IHOP.
“This has helped draw the connection between what drives consumers’ decisions and key items, such as guest feedback on our menus, limited-time offer performance, opportunities to differentiate ourselves from the competition, and much much more,” he said.
Dine Brands has highlighted the dashboard to better understand sales trends as well by analyzing how LTOs, competitive influence, and other facts impact its brand.
Cywinski said Applebee’s marketing strategy is ramping up to reflect the success stories. The “Eating Good in the Neighborhood,” initiative, which he led as chief marketing officer in a previous stint with Applebee’s, gives the chain “perhaps the most relevant distinctive and relatable brand position in the industry,” Cywinski said.
The company invested $14 million in Q1 to support this campaign. “Under the leadership of Joel Yashinsky, our chief marketing officer, Applebee's is once again defining who we are and what we stand for in the eyes of our guests,” Cywinski said.
Turning to IHOP, the 1,791-unit chain (1,679 domestic) got back in the green with 1 percent same-store sales growth, year-over-year. Comps dropped 0.4 percent in Q4.
Darren Rebelez, IHOP’s president, said the chain’s sales have improved more than 400 basis points over the last two quarters. To-go comp sales boosted 31 percent in Q1, and accounted for 6.5 percent of total sales. Online to-go orders are carrying an average check 36 percent higher than normal.
He credited this to “compelling value propositions” anchored by an $3.99 all-you-can-eat pancake promotion that marked the first time IHOP attached a national price point to its annual campaign. IHOP also launched a fresh marketing campaign with Droga5 to celebrate its 60th anniversary and paint a new trajectory for the brand.
“We're confident in our ability to sustain IHOP's momentum as most of the catalysts are within our control. These include providing abundant value, leveraging our deep culinary pipeline of new items that are unique to IHOP, and innovating marketing that resonates with consumers, just to name a few,” Rebelez said.
IHOP’s franchisees completed 46 remodels in its Rise ‘N Shine remodel program in the quarter, and 275 are expected to be completed this year. Since inception, more than 660 units, or 40 percent of the domestic system, have been remodeled. IHOP expects this to continue in the 250–300 range, per year, until it’s complete.
Rebelez said it’s all coming down to customer experience. The chain entered a strategic relationship with Comcast to upgrade the WiFi in its restaurants, which it hopes to finish by year’s end. “Our focus is to leverage technology where appropriate to eliminate pressure points from that guest experience,” he said.
IHOP recently introduced a new IHOP creation section of the menu to highlight the most creative items from its culinary team. “More than half of this section is portable and includes unique items such as buying off signature pancake sliders and the ultimate waffle stacked sandwich,” Rebelez said.
Consolidated revenues for Dine Brands were about $188 million in the first quarter compared to $191 million in the same period last year, due primarily to the new franchising of IHOP company-operated units in June, and partially offset by same-store sales growth for both brands.