In January, Dine Brands opened its eighth dual-branded IHOP/Applebee’s restaurant. The eight locations are all located in international markets, including the latest, which opened in Leone, Mexico. We may also start to see them open in the U.S, however.
During an interview with Dine Brands CEO John Peyton after the company’s Q4 earnings call Wednesday, he said there’s a lot to like about these prototypes – namely a shared back-of-house space. Such a shared space can maximize efficiency for the two brands that just happen to have complementary dayparts. On the exterior, Peyton said the prototypes have “discrete entrances,” while inside guests can flow between the two spaces. Again, that “flow” befits the brands’ complementary dayparts.
“At breakfast, when there are more IHOP customers, customers can be seated in the Applebee’s area and vice versa at dinner,” Peyton said.
With the same square footage as a traditional standalone IHOP or Applebee’s restaurant, the co-branded units are generating twice as much revenue.
“Which you would expect. They continue to perform well in their markets because they address all four dayparts,” Peyton added. “It’s a fantastic opportunity because the two brands are complementary.”
Such efficiencies are why other platform companies, like GoTo Foods (formerly Focus Brands) have homed in on dual-branded prototype opportunities. For Dine Brands, the goal is to bring its prototype stateside, and the aspiration is to do so in the next 12 to 24 months, so we could see shared IHOP/Applebee’s restaurants here as early as Q1 2025. If and when they get here, they will become part of the company’s broader development strategy, which is a bit more aggressive on the IHOP side at this time, but Peyton expects Applebee’s to get back to growth next year as well with a new prototype that generates better returns as well as conversions.
“Our brands fit anywhere – urban, suburban, college towns. They might have a different model in each market, but we’re following an infill strategy,” Peyton said.
Notably, as part of that infill strategy, Dine Brands reached an agreement this week with Flynn Restaurant Group – its largest Applebee’s franchisee – to develop 25 more restaurants over the next seven years.
To further incentivize franchisees to grow, Dine Brands also spent much of 2023 identifying annualized savings opportunities to beef up their balance sheets. The initiative last year yielded $53 million in such savings through efforts like renegotiating food costs. There are also more surgical efforts. Applebee’s, for instance, is moving toward automated beer machines that better manage the volume of each pour. The company has also changed its sanitation process to save up to 900 million gallons of water a year.
“The profitability initiatives with $50 million of annualized savings … is a tailwind,” CFO Vance Chang said during the earnings call.
Contact Alicia Kelso at [email protected]