DineEquity 'maniacally' focused on sales, traffic turnaround

DineEquity Inc., parent to the IHOP and Applebee’s chains, reported on Wednesday a 34-percent drop in fourth-quarter profit as the company completed its move to a 99-percent franchised model, saying the focus this year will be on reversing declining traffic and sales for both brands.

In a call with analysts following the report Julia Stewart, chair and chief executive of Glendale, Calif.-based DineEquity, brought to rest speculation that the company might be poised to bring on a third brand, saying they have “no immediate interest” in another acquisition.

Instead, she said the company is “maniacally focused” on turning around sales and traffic trends at both chains through brand differentiation and improving the perception of value.

Like other public companies this month, Stewart said this year’s change to the payroll tax has had a negative impact on consumer spending, but she said it’s not clear how long that will last. “The length and the duration of the impact, it’s just too soon to tell,” she said.

At Applebee’s, the strategy to build traffic has focused on menu quality improvements such as more healthful, under-550-calorie offerings and the “spirited cuisine” platform, as well as new social and digital media efforts.

Applebee’s domestic systemwide same-store sales increased 0.9 percent during the quarter, reflecting a higher average check that was offset by a decline in traffic.

Stewart said the chain’s late night and dinner dayparts are strong, but the company is working to invigorate lunch. Applebee’s has been testing the option of fast-casual-style “express” lunch service at corporate locations around Kansas City, for example.

At IHOP, the focus has been on menu innovation with value, such as the new line of Griddle Melt sandwiches, which are available as a half-sandwich with a side for $4.99.

Also new during the quarter was oatmeal with three flavor options, whole-wheat pancakes and waffles, and Stewart said more new daypart-crossing dishes are coming with a June 1 menu launch.

IHOP has long struggled with its value message, but Stewart said the chain’s value perception scores are improving. “We know value remains a high priority for our guests,” she said.