Applebee’s domestic same-store sales fell 7.9 percent in the first quarter ended March 31, parent DineEquity Inc. reported Tuesday.
The slide came on the heels of a 7.2-percent decline in same-store sales during the fourth quarter.
Recently appointed Applebee’s president John Cywinski said the brand had wandered too far from its identity as an “affordable indulgence,” and a lack of focus on the customer experience had undercut the restaurant’s earning potential.
“The brand has had a few missteps over the past 18 months,” Cywinski said.
He pointed to “middle America” and “middle income” diners as a neglected target audience.
“There was an attempt to reposition the brand in an aspirational manner into a modern bar and grill,” Cywinski said. “It’s indicated from the data that we may have alienated some core guests in the process.”
The repositioning Cywinski referred to was in 2016, when Applebee’s rolled out a wood-fired grill platform to disappointing results.
After introducing the equipment overhaul and new menu line, which featured hand-cut steaks, Applebee’s saw same-store sales drop 4.2 percent in the second quarter of 2016.
Eventually, Julia Stewart would resign from her post as DineEquity chairman and CEO.
With a mission to revitalize Applebee’s, Cywinski promised that the revamp would be extensive.
“There are no sacred cows here,” he said, suggesting that every facet of the brand’s operations would be reviewed and adjusted if necessary.
The re-evaluation will be thorough, but primarily internal. Cywinksi refused to blame overall downward segment trends for the poor financial results.
“I’ve done this before and I’m not naïve,” he told investors. “I know this brand and category intimately. While the category has certainly been challenged, I think Applebee’s recent subpar performance has been mostly self-inflicted.”
DineEquity reported first-quarter net income of $14.1 million, or 80 cents per share, compared with $25.2 million, or $1.38 per share, the previous year.
Revenue fell to $156.2 million, from $163.5 million the previous year.
DineEquity’s IHOP brand delivered a more stable performance. Domestic same-store sales fell 1.7 percent in the first quarter, and executives were bullish on the brand’s future development.
“I am very confident in several strategies underway at IHOP to drive sales and traffic, as well as improve the guest experience through restaurant remodels and expansion of our off-premises business,” Richard J. Dahl, chairman and interim CEO of DineEquity, said when results were released.
Glendale, Calif.-based DineEquity Inc. franchises restaurants under the Applebee’s Neighbhorhood Grill & Bar brand, and franchises and operates restaurants under the IHOP brand. Across the two brands, the company has more than 3,700 restaurants in the U.S., 18 countries and three U.S. territories.
Contact Dan Orlando at [email protected]
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