Part of the upside is the continued growth of off-premises, which lifted 123.7 percent year-over-year. The channel accounted for 33.3 percent of sales, or flat compared to Q4—that means the channel is sticking even as dine-in returns. In fact, while mix remained the same, off-premises weekly sales were higher in March compared to when IHOP was 100 percent off-premises last year.
It’s quite the turnaround, considering off-premises represented less than 10 percent of sales pre-pandemic.
“As I’m getting more business on dine-in, I’m getting the same lift on to-go simultaneously, which is why the mix is staying the same even though the total sales are going up,” Johns said. “Now long-term, I don’t know how well that will hold when we’re fully open and more people are willing to get out of the house and come out to eat. It’s quite likely that the mix will drop at some point and not stay at 33 percent, but I’m looking at those dollar sales. Those are important to me. If I can get back my full dine-in business, yet even if I have 20 to 25 percent off-premise mix, that’s way higher than what we did before the pandemic. That will all be incremental business and incremental flow-through for my franchisees on the backside of the pandemic.”
Another significant headwind is labor, something that isn’t unique to IHOP. The breakfast chain is aiming to hire 10,000 new workers for its franchised locations in the coming months. The brand plans to host a national recruiting day on May 19. IHOP and Applebee’s are making it easy for individuals to apply, whether it’s through text, email, or in person. Both brands are leveraging social campaigns to generate interest, as well. Peyton views it as a “point in time where the labor market is sorting itself out” as the country transitions from stimulus and enhanced unemployment benefits. He estimated that it’ll take three to six months to return to a steady labor market.
IHOP has also seen issues with the supply chain as growing customer demand is outpacing supply. But like the labor issue, Peyton viewed it as a moment in time. But for the time being, it is putting pressure on food costs. IHOP is looking at 1.2 to 1.6 percent food cost inflation, driven by paper and packaging, pork and chicken, and pancake mix.