Dine Brands reported its second quarter 2024 results Wednesday morning, and while there were slight improvements over the first quarter, the story remained mostly the same: Consumers are reining in their restaurant visits and spending.
“We began the second quarter with a strong strategy to address economic challenges, build our appeal to guests, and build on the positive momentum we experienced toward the end of Q1,” CEO John Peyton said during the earnings call.
That momentum, however, slowed to a crawl through the second quarter “to the extent that the trend reversed,” Peyton said during an interview Wednesday morning. “The first four months [of the year] were encouraging, but there was a change and softness in the last three months that was somewhat unexpected for us.”
Applebee’s reported a Q2 same-store sales decline of 1.8%, versus negative 4.6% in Q1, while IHOP’s same-store sales decreased 1.4%, compared to negative 1.7% in Q1. Because of this pressured environment, Dine reduced its full-year outlook and is now targeting a same-store sales decline of 2%-to-4% for Applebee’s, from 0%-to-2% previously, and a same-store sales result of 0-to-negative 2% for IHOP, from a 1%-to-3% previously.
To adapt to the pressured environment, Applebee’s and IHOP have both adjusted their marketing calendars to offer value-focused promotions such as Applebee's Dollarita, all-you-can-eat boneless wings, riblets, and double crunch shrimp, and IHOP’s all-you-can-eat pancake deal and 2 x 2 x 2 Combo.
“The 2 by 2 by 2 promotion wasn’t on the calendar this time last year. We added it because we felt guests needed it at this time,” Peyton said.
This is one of the learnings Dine Brands is pulling from the first half of the year to better manage the second half of the year. Peyton said agility based on what’s happening “on the ground in real time” is priority number one.
“Number two, we’ve talked a lot about how building promotions is both an art and a science to reach a continuum, from those that are less expensive to those that are higher priced. We’re beginning to shift that pendulum more toward driving value to drive traffic,” Peyton said.
The third priority heading into the latter half of the year is to sharpen the focus on off-premises business. During Q2, Applebee’s off-premises sales mix accounted for 21.4% of sales, versus 22.6% during the same period last year. IHOP’s off-prem sales mix was 19.8% in Q2, versus 20.7% last year.
“We have a channel that is 20% of the business that we didn’t have before and we … have to nurture it from a marketing perspective to make sure it remains top of mind. We’re investing in it because it’s a significant channel for us,” Peyton said, adding that the economics of off-premises are favorable for operators since third-party costs are largely passed onto the consumers.
On a positive note, while Dine Brands doesn’t break out specific traffic numbers, executives shared that the chains outperformed Black Box Intelligence traffic numbers for their respective categories in Q2. Further, the companies haven’t lost market share to any competitors despite an uptick in promotional activity across segments.
“The most meaningful factors that have impacted our performance are external, like household incomes and pricing,” chief financial officer Vance Chang said during the call. “There isn’t one single casual dining brand that’s impacting our results.”
To that extent, franchisees have taken a “modest and conservative approach” to raising menu prices this year – at Applebee’s, they’re up 2.6%, for instance. These tactics – conservative pricing, a deeper focus on value, and a more agile marketing calendar – are the levers Dine Brands will continue to pull for now. Coupled with a new partnership between Applebee’s and the NFL, Peyton remains optimistic that the company will navigate the “choppy waters” expected throughout the remainder of the year.
“Our strategy extends beyond temporary discounts and focusing on long-term guest satisfaction. We have a deep arsenal of profitable promotions, menu innovation, and marketing campaigns that we can deploy in the near term while remaining focused on sustainable value creation in the long term,” he said. “We’re not losing sight of our North Star, which is having brands where guests come for value. In tough times, they’ll continue to look for us for value. We will not stray from that.”
Dine Brands Q2 by the numbers
- Applebee’s same-store sales declined 1.8%
- Applebee’s off-premises sales mix accounted for 21.4% compared to 22.6% in Q2 2023
- IHOP same-store sales declined 1.4%
- IHOP’s off-premises sales mix accounted for 19.8% compared to 20.7% in Q2 2023
- Q2 2024 revenues were $206.3 million compared to $208.4 million in Q2 2023
- Consolidated adjusted EBITDA was $67 million, compared to $67.3 million in Q2 2023
- In Q2, there were 16 new restaurant openings between the two brands, and 25 restaurant closures
Contact Alicia Kelso at [email protected]
