Dine Brands CEO Stephen Joyce said Applebee’s value deals are designed to increase margin as they lift traffic. Abundant value, strong price points, and driving visits in a balanced fashion through a combination of “mild price” increases as well as mix management. In that strategy, pricing goes up, but not because of strict dollar changes. Rather, Applebee’s effectively highlights different menu items so it can influence where the customer goes. They come in for the discount, order more premium items or return later to try them, and check goes up.
If the brand regularly presents abundant value at aggressive prices and still achieves that, “we are going to win in the marketplace,” Joyce said.
The $7.99 “Irresist-A-Bowls,” for example, which landed in late January and featured options like Crispy Orange Chicken and Tex-Mex Lime-Grilled Shrimp, were well received by guests and operators. And it’s the type of program “we’re hanging our success factors on,” Joyce said.
Applebee’s has a “lot of dry powder,” with this, Cywinski added.
“We do from a beverage standpoint, we do from a culinary standpoint, and marrying that right relevant message with the right demographic, within the right occasion framework, understanding the drivers for those guests is really important for us,” he said.
Cywinski joined Applebee’s in March 2017 for the second time, leaving his post as EVP of Brinker International. He also spent roughly four years at KFC. Previously, Cywinski clocked in as Applebee’s CMO and was responsible for the chain’s Carside To-Go and “Eatin’ Good In The Neighborhood” initiatives.
So, he brings an interesting vantage point to Applebee’s value design and how to accomplish the aforementioned goals. Beyond the value product and execution, Cywinski said content needs to be strong, too. “The advertising must be compelling and you must have the media muscle to drive incrementality, right?” he said.
This is somewhere Applebee’s can flex versus competitors. “I'm not sure if you look across the landscape, in particular, it's smaller players without scale, that they have the ability to do that on a consistent basis,” Cywinski said. “You can engineer a proposition to be attractive for a guest, but if you don't have the muscle and the effective communication to drive awareness and trial and repeat, you're going to fail in that proposition.”
The topic of value carried throughout Monday’s fourth-quarter and full-year review. Applebee’s same-store sales declined 2.5 percent, year-over-year. The result measured against its own strong 2017 and 2018—a two-year comp hurdle of 4.8 percent that marked the highest Applebee’s has faced since 2012. For fiscal 2019, the chain’s same-store sales dropped 0.7 percent while rolling a 5 percent bump from the prior year.
A look at the same-store sales track:
- Q1 2016: –3.7 percent
- Q2 2016: –4.2 percent
- Q3 2016: –5.2 percent
- Q4 2016: –7.2 percent
- Q1 2017: –7.9 percent
- Q2 2017: –6.2 percent
- Q3 2017: –7.7 percent
- Q4 2017: 1.3 percent
- Q1 2018: 3.3 percent
- Q2 2018: 5.7 percent
- Q3 2018: 7.7 percent
- Q4 2018: 3.5 percent
- Q1 2019: 1.3 percent
- Q2 2019: –0.5 percent
- Q3 2019: –1.6 percent
- Q4 2019: –2.5 percent
Dine Brands as a whole came out with quarterly earnings of $1.78 per share, which beat Wall Street estimates of $1.68. The company posted Q4 revenues of $227.51 million compared to year-ago figures of $215.20 million. IHOP’s same-store sales climbed 1.1 percent—its eighth consecutive period of positive gains.
Notably at Applebee’s, the chain’s franchise base reduced by net 17 restaurants in the period (16 closed internationally and three domestic, to go along with two openings), giving Applebee’s 1,787 total restaurants as of December 31. In the U.S., there are now 1,665 locations.
This concluded, Cywinski said, a three-year strategic initiative to close about 200 underperforming restaurants. Moving forward, the brand will target no more than 10–15 closures per year, he said. Additionally, after three years of navigating royalty and advertising bad debt, Applebee’s begins 2020 with a healthy franchise system and no material delinquencies.
It’s an important piece of this value debate because it promises more stable and predictable income streams as well as a fully funded 4.25 percent national marketing plan, Cywinski said.
Also, perhaps less tangibly but equally vital, the franchisees still on board are, in fact, on board with Applebee’s “need to remain relevant among value seekers throughout the year,” Cywinski said. The performance gap has narrowed.