In February, Dine Brands CEO John Peyton touted the company’s dual-branded IHOP and Applebee’s locations which have opened in a handful of international markets. Fans of both brands rushed to their keyboards to share their excitement (and curiosity) about the potential of such a hybrid model coming to the U.S. Now we have a better idea of just when that might happen. During a recent interview at the Dine Brands headquarters in Pasadena, California, Peyton said the plan is to have a few of these locations open stateside in the first quarter of 2025.
“We’ve got 10 open overseas and another 10 or so will open this year overseas, and so our plan now is to bring that to the U.S.,” he said.
The domestic openings will serve as a test in which the company can learn from and refine the model for the American guest. Peyton said the international locations have performed strongly, creating plenty of confidence about their potential here. He said there’s a lot to like about these models, including an efficient back-of-house “flow” that befits the two brands’ complementary dayparts. This is helping to generate twice as much revenue as a traditional standalone IHOP or Applebee’s restaurant with the same square footage.
“You’re getting two for the size and space of one. They have a shared kitchen and a red side and a blue side for Applebee’s and IHOP, and a purple in the middle, so when you walk into the restaurant, you’re greeted by a host who then seats you on either side depending on which restaurant you prefer,” Peyton said.
That said, customers can order from both menus should they choose to chase down their Cinna-A-Stack with a Dollarita; the staff is cross trained for such experiences. To be clear, however, this is less about some creative meal mashup and more about efficiencies – a critical objective in a relentlessly tough environment.
“The real beauty of it is for the franchisee that owns that restaurant. This activates four dayparts throughout the day,” Peyton said. “And so, what we are demonstrating oversees is you’re adding IHOP a.m. to Applebee’s p.m. and you’re getting 2x or more of revenue in the same box.”
For Applebee’s, these dual-branded restaurants could play nicely into the chain’s goal to get back to net unit growth in the near future. It doesn’t hurt that Applebee’s President Tony Moralejo was president of the Dine Brands international and global development division when the dual-branded concept debuted in Canada.
“I’m very familiar with the investment thesis of the dual brand, which is a franchisee owner/operator-centric initiative. It is meant to capitalize on two brands that have completely complementary dayparts in one building and the trick is can you get operational efficiencies out of it as well,” Moralejo said during a recent interview. “Can you execute both brands and their respective dayparts out of one kitchen and share some of those costs associated with building a restaurant?”
Admittedly, Moralejo said the company doesn’t know those answers yet and the business case still needs to be proven out domestically, which is why the company is starting small.
“We’ll build a handful of them in the U.S. and test and learn and, hopefully, if our thesis is correct, it will be a vehicle to jump start growth for both brands,” he said.
IHOP plans to add 15 to 25 net new domestic restaurants this year, but that’s not to say it’s been easy. President Jay Johns said that’s why this dual-branded restaurant initiative is an attractive possibility for its development strategy.
“The cost of new restaurants has exploded and anything we can do to get efficiencies in the box we’re building will help,” he said during a recent interview. Johns adds that this model isn’t quite like the dual-branded quick-service restaurants that exploded 20 or so years ago, again, because peak hours are different. The complementary dayparts, he adds, are the key to making this work for Dine Brands.
“Fast food did this quite a bit but sometimes the rushes were at the same time, so it wasn’t as efficient. This is different. It isn’t about getting as many of our brands in a building as possible, it’s how do we take complementary brands and get them in the same building to optimize sales,” Johns said. “We don’t know yet; we’ve got to get some started. We do know it’s been working well internationally.”
Contact Alicia Kelso at [email protected]
