IHOP is Now America's Largest Casual-Dining Chain
IHOP continues to reap the benefits of last year’s eyebrow-raising campaigns as the brand transitions from a breakfast destination to an all-day dining destination.
Even though the IHOb promotion debuted last June, IHOP’s sales are still steadily climbing. Same-store sales upped 3 percent during the fourth quarter of fiscal 2018, which represented the brand’s best performance in more than three years (Q3 of 2015). Also, it marked the fourth consecutive period of gains for IHOP.
“This also marks the fourth consecutive quarter that IHOP outperformed the family dining category based on comp sales,” brand president Darren Rebelez said during a February 21 conference call.
IHOP’s same-store revenue grew 1.5 percent and total revenue lifted 3.9 percent year-over-year, “both of which have been the brand's best performance since 2015,” Rebelez said.
But the company isn’t getting comfortable just yet. Over the last year, IHOP strategically implemented different initiatives—some with long-term benefits, some with short-term benefits—that are designed to help the brand maintain its stellar run.
Along with the marketing success, franchise growth, expansion of off-premises, enhanced guest experience, and menu innovation have been key targets.
“We're heading into the new year with a lot of brave momentum,” Rebelez said. “… It was an incredible year for IHOP with several notable highlights, including our 50th anniversary, creating a media buzz with the IHOP name change campaign to launch our Ultimate Steakburgers platform, and opening our 1,700th domestic IHOP. I'm confident that 2019 will be yet another successful year for the brand.”
Growth in to-go
Off-premises continues to be a strong point for IHOP, with room to expand in the future. During the last quarter, off-premises sales grew 23 percent and to-go traffic rose 13 percent.
With an improved website and new app, IHOP leadership hopes to drive more customers to order online.
“With the increasing relevance of online ordering we believe there is significant upside potential,” Rebelez said. “Best of all, online ordering isn't just more efficient; it's more profitable.”
Compared to regular to-go orders, Rebelez said, online orders are tracking about 31 percent higher.
Since IHOP launched nationwide delivery with DoorDash in July, the number of participating restaurants tripled. Delivery now accounts for 8 percent of overall sales. More than 1000 restaurants offer the service and, by the end of 2019, an additional 300 restaurants are expected to join.
“This year our focus will be on expanding our relationships with other leading delivery service providers as well as increasing marketing efforts aimed specifically at building awareness around our IHOP and Go program, and driving new and repeat off-premises business,” Rebelez said. “[It’s] another component to being where the guest is and putting more IHOP restaurants where our guests won't go.”
Where Applebee’s and IHOP differ
After opening 34 U.S. restaurants and 11 international restaurants, IHOP surpassed 1,800 units during the fourth quarter. This is one area it differs from its sister brand. While Applebee’s strategy of shuttering underperforming locations took it down 5.1 percent to 1,837 units, IHOP expanded 2.5 percent, year-over-year, to 1,831 stores. There are now more domestic IHOPs (1,705) than Applebee’s (1,693), making it the largest casual-dining brand in the country. This time a year ago, those numbers were 1,671 and 1,782, respectively.
Along with new locations, IHOP is giving existing stores a facelift. The Rise N’ Shine remodel is a modern take on the restaurant that enhances the overall experience for guests.
“Our guests were in modern comfortable restaurants that exceeds their expectations and we gave it to them with a Rise N' Shine remodel,” Rebelez said.
Remodels have gone so well that a second version of the Rise N’ Shine model with more technology is currently being tested. Guest-facing tools like tablets and wireless credit card devices will allow more efficiency and accuracy when a customer dines at IHOP.
In 2018, IHOP completed 275 remodels “bringing the total number of restaurants with the Rise N' Shine image to over 1,000 when combined with new restaurants openings,” Rebelez said.
During 2019 IHOP expects franchisees to open 35–55 new restaurants systemwide. Dine Brands chief financial officer, Tom Song, expects a majority of these to open domestically.
Power of the message
IHOP began 2018 as a breakfast destination and ended the year as an all-day dining one. The IHOb promotion played a major role. During the fourth quarter, burger sales continued to increase and have more than doubled since the June launch.
“We successfully changed the narrative regarding lunch and dinner occasions at IHOP with strongest dayparts for both the fourth quarter and full year,” Rebelez said. “With abundant value and variety on our menu we proved that we can attract guests any time of the day.”
Breakfast is still the main focus when it comes to menu innovation, but IHOP isn’t boxing itself into the segment when it comes to crazy promotions and marketing campaigns in the future. Earlier this month, the Pancizza—a pancake the size of a pizza—was released as a LTO product as a part of a promotion celebrating delivery and IHOP’s partnership with DoorDash.
“People are seeing that we are having fun with this,” Dine Brands chief executive officer Steve Joyce said. “I think it makes us an interesting set of brand. There is a strong loyalty on both sides. And I think we are now delivering on that but in a way that's fun. It's a little edgy at times, but it's always innovative and we don't take ourselves too seriously. And I think that's resonating with the 99 percent of the American public that we represent.”