Applebee's burger and wings.

Dine Brands and Franklin Junction's partnership will start in Japan. 

Applebee's and IHOP Turn to Ghost Kitchens for International Growth

The restaurants are partnering with Franklin Junction, a company that will provide spaces for the brands to act as delivery-only concepts in new global markets. 

The era of virtual restaurants isn't over, according to Dine Brands, parent of Applebee's, IHOP, and Fuzzy's Taco Shop. 

The company announced Wednesday a new partnership with Franklin Junction, a company that enables restaurants to expand into new markets as virtual brands. Orders are locally produced inside Host Kitchens by Franklin Junction's fulfillment partners. 

Applebee's and IHOP will use this agreement to enter new markets in Japan, the Netherlands, France, and Belgium. The initial launch will take place in Japan by the fourth quarter. 

"We are thrilled about this relationship with Franklin Junction, as it opens up new opportunities for IHOP and Applebee's in key international markets. We are confident in our ability to scale and deliver exceptional dining experiences to guests worldwide," Scott Gladstone, Dine's president, international and corporate development, said in a statement. 

Franklin Junction comes with an e-commerce tech stack and data-driven insights that will allow Applebee's and IHOP to customize their menus to suit the preferences of each market. 

"We are excited to collaborate with Dine Brands to bring the beloved IHOP and Applebee's brands to diners around the world," Franklin Junction CEO Rishi Nigam said in a statement. "With our innovative Host Kitchen platform, we are revolutionizing the way restaurants expand internationally, and this relationship marks a major milestone in our mission to redefine restaurant economics and the future of dining."

Earlier this year, Franklin Junction was named one of Fast Company's "World's Most Innovative Companies." In late 2022, it formed a partnership with Hooters—a deal in which the brand serves as a virtual brand inside Host Kitchens and uses its own restaurants to operate other delivery-only concepts. Other brands on the platform include Bennigan's, Frisch's Big Boy, and Nathan's Famous. Franklin Junction claims that last year it gave its partners up to 50 percent incremental e-commerce revenue with average profit margins of more than 25 percent.

Dine is no stranger to virtual brands. In early 2021, Applebee's released Cosmic Wings, which offered a variety of chicken products covered in Cheeto flavors. But the chain has since pivoted away from the concept to relieve operational complexity inside the back of house. IHOP's first virtual brands, Thrilled Cheese and Super Mega Dilla, are in more than 1,200 restaurants, president Jay Johns reported in March. During the first quarter, the company introduced two additional concepts—TenderFix and Pardon My Cheesesteak, which are in 500-plus stores as of May. These two "quickly became among our virtual brand top performers," Dine CEO John Peyton told investors. He added that the company is "bullish on the opportunity virtual brands present."

Although Dine remains confident about the future of virtual brands, the segment has taken some recent hits. Nextbite, which supplies Thrilled Cheese and Super Mega Dilla for IHOP, went through multiple rounds of layoffs and was sold to Sam Nazarian's C3 platform. Additionally, YouTube star Jimmy Donaldson—aka MrBeast—claimed on social media that he was moving on from MrBeast Burger because of problems with quality. He also mentioned that he wanted to shut it down, but that the "company I partnered with won't let me stop even though its terrible for my brand." MrBeast Burger was created in 2020 alongside Virtual Dining Concepts. 

Meanwhile, third-party platforms have cracked down on virtual brands that don't meet certain requirements. Uber Eats has removed 8,000 digital restaurants from its system since March, Business Insider said.