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IHOP is on track to open its 1,700th domestic restaurant by the end of the year.

IHOP is No Longer Just a Breakfast Destination

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Lunch and dinner are picking up speed at the casual chain.
By Rachel Taylor November 2018 Finance

IHOP’s gamble on burgers and IHOb stunt over the summer seems to have paid off for the Dine Brands chain.

During the third quarter, same-store sales increased 1.2 percent compared to this time last year. This marks the third consecutive period of sales growth for IHOP, president Darren Rebelez said during an October 31 conference call.

Rebelez reiterated IHOP is no longer just a breakfast destination. The buzz about new steakburgers and non-breakfast menu items generated from the IHOb campaign continued during the third quarter. IHOP’s focus on driving guest traffic during its historically softer lunch and dinner dayparts translated into real results. Rebelez said the Ultimate Steakburgers helped drive more than 300 basis points of improvement in dinner daypart traffic compared to the same period a year ago.

READ MORE: Applebee's shatters expectations again.

“We've changed the narrative about our lunch and dinner occasions,” Rebelez said during the call. “We've clearly proven that we can attract guests throughout the day, not just at breakfast. Since the launch of IHOP's highly innovative and all-new Ultimate Steakburger platform in mid-June, our dinner daypart has delivered positive comp sales every week.” IHOP also experienced positive sales growth across the lunch and overnight daypart, he said.

Customers have responded well to the new menu changes and IHOP sees burgers as the right food to focus on when it comes to future menu innovation.

“Having great tasting, quality burgers is how we breakout from the clutter and start to grow our business beyond breakfast while continuing to take share from the competition,” Rebelez said.

Along with innovation on the menu, the brand continued to refine and improve customer experience within the restaurant. For the second consecutive quarter, IHOP said it had the highest absolute scores for overall satisfaction and revisit intent in family dining and casual dining

IHOP’s to-go business is also an area where the brand sees long-term. Over the last year, to-go sales and traffic have almost quadrupled. Off-premises sales overall increased 2 percent from last year and accounts for 7 percent of IHOP’s sales overall.

“IHOP's to-go business is an integral part of our long-term strategy to drive sustainable sales and traffic,” Rebelez said. “For the third quarter, to-go comp sales increased by a solid 35 percent and to-go traffic grew by approximately 26 percent. By comparison, to-go comp sales and traffic were approximately 8 percent and 4 percent, respectively, for the third quarter of 2017. We are confident we can grow this business to the mid-teens over the next few years, with much of this being incremental contribution.”

Delivery also has a strong role in IHOP’s off-premises strategy. DoorDash recently partnered with the chain to bring delivery services to 700 restaurants nationwide. By the end of 2018 IHOP expects to have 1,000 restaurants using delivery with DoorDash. The company also partnered with GrubHub and Amazon to give customers even more ways to dine off-premises.

“To-go and delivery options now have a greater influence over consumers' decisions on how and where they dine and we've taken strategic steps to address the convenience needs of our guests,” Rebelez added.

As for overall growth, the company is on track to open its 1,700th domestic restaurant by the end of the year. Franchisees opened nine new units during the third quarter, and so far, 28 new restaurants have opened in the first nine months of 2018.

"Keeping the atmosphere in our restaurants contemporary and appealing is conducive to driving incremental visits from guests and therefore sustainable positive sales and traffic.” — Darren Rebelez, IHOP president.
IHOP
IHOP plans to hit 1,700 domestic units by the end of the year.

Along with debuting new units, IHOP is also undergoing a remodeling initiative of existing restaurants to bring a fresh look to the brand. Under the Rise ‘N Shine remodel program, IHOP franchisees completed 71 remodels, bringing the total of remodeled domestic restaurants close to 800, or 47 percent of domestic units.

Rebelez expects to continue restaurant remodeling at a rate of about 250–300 restaurants per year until all restaurants are updated.

“Just as new unit development is important to keeping the unit base revitalized with newly imaged restaurants, the remodeling of existing restaurants is equally relevant to significantly enhancing the guest experience,” Rebelez said. “Keeping the atmosphere in our restaurants contemporary and appealing is conducive to driving incremental visits from guests and therefore sustainable positive sales and traffic.”

Modernizing the look of the restaurant is just one aspect of the remodel. Rise ‘N Shine 2.0 restaurants that recently opened in California and New Jersey are equipped with new technology that will help improve operations and guest experience.

Some of the new technology that will be used includes server tablets to improve speed and order accuracy; wireless credit card devices, allowing guests to quickly pay at the table; and a no-wait tool to provide guests with more accurate wait times and lessen overall waits on busy days. Overtime, all restaurants will be updated with this new technology.

“The introduction of these technology platforms and the latest iteration of the Rise 'N Shine remodel ties in all aspects of enhancing the guest experience,” Rebelez said. “We believe this will be a real differentiator in the category and drive the sustainability of the brand as the leader in family dining. I will continue to update you on progress as we learn more from these initial test restaurants.”

“Our guests crave our food and they want it whenever and wherever it suits them,” said Steve Joyce, Dine Brands chief executive officer. “We know that technology plays an increasingly important role in consumers' dining decisions, so we're making greater use of technology to ensure that their needs are met.”