Applebee’s is Finally in the Driver’s Seat Again

The restaurant renaissance has arrived, CEO says.

May 6, 2021 Danny Klein

Applebee’s brand president John Cywinski was preaching to the full-service restaurant choir on Wednesday. “For the first time in a long time,” he said, “I now believe we control our own destiny.”

Going back to the second week of March 2020, restaurants became the tip of the spear of COVID-19 clampdowns. Then-President Donald Trump suggested, on March 16, Americans avoid eating and drinking out. In lieu of dine-in, he asked citizens to try takeout and delivery.

As impressive as off-premises gains have been since, it’s never shaken the fact COVID stripped the differentiating DNA out of the sector. “Think about our brand purpose,” Cywinski said during a conference call. “It’s facilitating connection, emotional connection between folks over a meal and a drink. And they’ve been longing for that. They’re hungry to dine-out again.”

“And so the convenience driven occasion has very clear drivers, but that dine-in occasion is about connection, it's about indulgence, it's about being served and being relaxed and a little escape from home,” he added. “We love our position on that front.”

To Cywinski’s point, Applebee’s and thousands of sit-down concepts never had a chance to reinforce that position. Lockdowns. Curfews. Capacity restrictions. And, broadly, messaging that going out to eat was a personal safety risk.

Just a couple of months ago, though, Dine Brands’ new CEO, John Peyton, told investors he believed the industry was “on the cusp of the restaurant renaissance,” and that all those setbacks were starting to ease.

“And our headline today is that the renaissance is here,” Peyton said Wednesday. “I love this notion of renaissance because it's all about resurgence and creativity and pushing beyond established boundaries.”

At the end of Q1, 99 percent of the company’s domestic restaurants were open, including Applebee’s sister brand, IHOP.

Applebee’s performance of late reflects Cywinski positive turn—that the company is finally driving results on its own terms.

In January, same-store sales declined 17.9 percent, year-over-year. The figure improved to negative 16.9 percent in February before leaping 103.3 percent in March (lapping against the start of COVID). For all of Q1, comps lifted 11.9 percent against a 10.5 percent decrease in Q1 2020.

And April through May 2, the chain’s comps were up 237.4 percent. While an eye-opening figure, it’s one that’s become standard fare for full-service chains capitalizing on pent-up demand, stimulus checks, and loosening restrictions measured against one of the most difficult month-long stretches in sector history.

The better view is Applebee’s sales relative to fiscal 2019. In that case, January comps were 15.1 percent lower; February 13.7 percent under; and March 6.1 percent higher.

That latter block is the one that has Cywinski feeling optimistic.

“In fact, in more than four years as president of Applebee’s, I honestly can’t recall the brand being in a better position than it is at this very moment,” he said.

Applebee’s delivered the two highest monthly sales volumes since the company became DineEquity in June 2008 (it flipped to Dine Brands Global in February 2018).

It’s actually likely March and April represented two of Applebee’s all-time highest-volume months in the 40-year history of the brand, Cywinski said. But the company’s database only stretches back 13 years

More concrete, however, Applebee’s delivered 11.4 percent same-store sales growth in April compared to the same period in 2019.

“While it's impossible to determine how much of this momentum can be attributed to government stimulus versus demand, it's very clear to me that America is dining out again in full-force,” Cywinski said.

According to industry tracker Black Box Intelligence’s 2021 comp sales versus 2019, Applebee’s has outperformed the casual-dining category for 12 consecutive weeks, on an average of 560 basis points.

What’s notable, too, Cywinski said, is the performance feels reminiscent to Q1 of last year, when Applebee’s posted 10 consecutive weeks of positive comps before COVID crashed the picture.

Cywinski added Applebee’s recent momentum started to emerge in the last week of February, well before stimulus checks. The chain introduced a burgers and wings event (five boneless wings for $1 with a burger purchase) that resonated with guests, he said, anchored by chicken fried lyrics from the Zac Brown Band.

Applebee’s Irresist-A-Bowls returned in April, supported by AC/DC’s “Back in Black” theme. The brand also saw success with $5 Mucho Cocktails. “The easing of capacity constraints, the opening of bar seating, and the re-emergence of our late-night daypart represent clear incremental growth opportunities as we progress through the year,” Cywinski said.

This is an important trend to follow as well. If you go back a year, when dining rooms were completely shuttered, Applebee’s was a 100 percent off-premises business. In turn, alcohol consumption was negligible, with the exception of some cocktails to-go.

It’s really where one of the biggest divides of the COVID era formed. Quick-service chains enjoyed higher check and larger orders from delivery and takeout, while sit-down concepts took a sturdy hit from the lack of beverage attachment.

Historically, alcohol mixed 14–15 percent of sales at Applebee’s. So when off-premises moved from 12 percent of total business (pre-pandemic) to north of 40 percent, the highly profitable channel absorbed a massive blow.

Things are changing. “We've seen some indication, I wouldn't call it a trend, of indulgence as we come out of this pandemic, with guests really enjoying their experience and things like alcoholic beverages and appetizers and desserts being ordered with some frequency,” Cywinski said. “[It’s] now perhaps a special occasion that hasn't taken place in quite a while. We look at the alcohol business and in particular, the late night daypart, which was hardest hit in the pandemic, as significant growth opportunity for us and perhaps others.”

“I've got so much confidence in our future, because I really believe that restaurants are an essential part of society and people want a place to gather and celebrate,” Dine Brands CEO John Peyton said. “And after 13 months of being locked in our houses, we Americans are ready to do that.”

In April, Applebee’s sales mix consisted of 67 percent dine-in, 20 percent Carside To-Go, and 13 percent delivery. The brand's off-premise comparable same-store sales in Q1 increased by 122.7 percent.

Included in that delivery bucket is the brand’s new virtual concept, Cosmic Wings. After about 10 wings in market, Cosmic Wings’ sales averaged about $330 per restaurant, per week, with significant geographic variability reflecting Uber Eats coverage, Cywinski said.

Essentially, there are restaurants generating less than $100 per week, and some pushing sales as high as $2,000. The company will add Postmates delivery this week and then expand to include DoorDash by month’s end.

“After this expansion, I should be able to quantify the size of the Cosmic Wings opportunity,” Cywinski said. “In the meantime, you can use your imagination as to what the addition of DoorDash may mean for the business.”

In March and April, Applebee’s restaurants averaged $54,000 per week. As dine-in came back, off-premises volume maintained between $17,000–$18,000.

“The mix has declined as dine-in has come back, if you look at it on a percentage basis. If you look at it on a dollar basis, it's held steady,” Cywinski said.

What this means and how it unfolds in time, Peyton offered perhaps the best description. “Applebee's and IHOP, one could argue we're not significantly in the off-premise consideration set before the pandemic, and now they are. And we need to keep that,” he said.

Yet the banner target remains dine-in, and that’s only picking up. Applebee’s scaled back media spending in January and February, but now has a sizable national plan balanced throughout the remainder of the year.

The idea was always to keep the powder dry until the message could center on a “welcome back” mantra. And that’s where the brand firmly sits today.

“We want the world to know right now that Applebee’s and IHOP are open for business,” Peyton said. “So our marketing plans encompass national TV, digital media, social media platforms, and one-to-one marketing.”

Inside restaurants, Applebee’s recently integrated handheld tablets in about 500 locations. With staffing challenges across the country, these provide a meaningful hedge against labor inflation while enabling service to be more efficient in taking care of guests, Cywinski said.

“Bottom line, the servers love these tablets because it makes their job easier and allows them to make more money,” he said.

Additionally, in the past year, Applebee’s took a roughly 33 percent reduction in its core menu. It’s led to better margins and execution. “I should also reinforce that over the past year our teams have been quietly focused on building an awesome innovation pipeline of culinary beverage marketing and technology initiatives for future deployment,” Cywinski said.

Dine Brands has faced hiring challenges like the rest of the sector. With demand surging, the company wants to hire 20,000 employees and plans to host national recruiting days on April 17 and April 19, with campaigns behind them. Peyton said they’re doing everything possible to make it easier for people to apply, whether that’s via text, email, and in-person. “And both brands are leverage very creative social campaigns to generate interest,” he said.

Looking ahead, Peyton said Dine Brands is developing and investing in new smaller restaurant prototypes for both brands. Ghost kitchens are in the works, too (IHOP has them in Dubai, Applebee’s in Kuwait). Guests can now request QR code menus and tables aren’t set until guests are seated.

“I've got so much confidence in our future, because I really believe that restaurants are an essential part of society and people want a place to gather and celebrate,” Peyton said. “And after 13 months of being locked in our houses, we Americans are ready to do that.”