Customers are seeking out value deals at an increasing rate.

The story at Applebee’s to start the year isn’t singular. Like brands from KFC to First Watch, the casual chain saw large areas of the country sag through weather in January before improving as the quarter progressed. That and “consumer caution with respect to economic conditions in the post-holiday period,” Dine Brands CEO John Peyton explained, brought Applebee’s to its first negative Q1 since the pandemic, although it’s now comped red for four straight periods overall (Q4 2023 at –0.5 percent; Q3 2023 at –2.4 percent; and Q2 2022 at –1 percent).

Perhaps the best illustration of what’s shifted, as diners get more selective and infrequent with their occasions, is 28 percent of Applebee’s transactions were tied to a limited-time offer or promotion in Q1. Last quarter and year, it was 19 percent. It jumped 9 percent in a matter of months. Typically, Applebee’s reports in the mid-teens.

And alongside that purchasing activity, Peyton said, customers continue to trade down from higher priced items—“another indicator that guests are managing their wallet,” he said.

Applebee’s is no stranger to the “value seeker,” as the brand has referred to this cohort in the past. In pre-pandemic days, 20 percent of Applebee’s consumer base fit the definition.

Q1 trends

  • Q1 2024: –4.6 percent
  • Q1 2023: 6.1 percent
  • Q1 2022: 14.3 percent
  • Q1 2021: 11.9 percent
  • Q1 2020: –10.6 percent (this after 10 consecutive weeks of positive comps and nine straight of positive comparable traffic since the start of 2020, or proof of how deep the COVID cliff was at the onset)
  • Q1 2019: 1.8 percent

The biggest adjustment has stemmed from the $50,000 and under group, Peyton said. The higher you go in income ranges, the more consistent performance gets. “And we’ve also observed that when our guests are in the restaurant, again, particularly our lower-income consumers, they’re more aggressively managing their check, finding our value-oriented items, et cetera,” he said. “And that’s been consistent the last couple of quarters but more pronounced in Q1.”

So the question is how will Applebee’s communicate value in a hyper-charged climate where promotional deals are darting from all sides, including chains that don’t often play in this arena?

MORE: IHOP Gets Back on Virtual Brand Footing After Nextbite Collapse

In the period, Applebee’s rolled three LTOs spaced throughout the quarter “that delivered on our focus of offering compelling value aligned with our brand promise,” Peyton said, “meeting the guest where they are and pairing the relevancy of our brands with important cultural moments.” That partly explains the 28 percent context. “We’re comfortable with that number because it’s what we think is necessary now in an environment where the guest is so promotion driven across the segment,” Peyton added.

This approach is likely to ramp up as LTOs become the gateway of value (brands aren’t going to suddenly lower price on core parts of the menu).

Applebee’s started January with an All You Can Eat promotion that outperformed the same deal from the prior two years. Then, a month later, the now-viral Date Night Pass arrived in time for Valentine’s Day, offering guests more than $1,500 in dining value for $200. Peyton said it sold out within minutes.

That Date Night Pass and media coverage that ensued generated north of 2.4 billion impressions. The social conversation on Applebee’s and Date Night increased over 115 percent.

In March, as NCAA tournament season kicked in, Applebee’s leveraged a national double blind taste test to promote boneless wings as “America’s favorite.” Essentially, Applebee’s conducted an online omnibus survey where 1,000 consumers were asked to identify a national restaurant chain that served their top boneless wings. Applebee’s placed third. Then, it hired an independent group, Irwin Broh Research, to perform a nationally representative double blind taste test among those three brands. It went to the West, Midwest, East, and South. Applebee’s put its classic buffalo sauce and boneless wings against the two competitors. And with “overwhelmingly statistical significance,” CMO Joel Yashinksy previously told FSR, Applebee’s was victorious in each of those markets.

In response, Applebee’s offered 50-cent boneless wings on Wednesdays. It followed with a marketing program that included a TikTok promotion giving someone a chance to win boneless wings for life. Customers entered for a chance to win by sharing their celebration of “America’s Favorite Boneless Wings” on TikTok using #ABWings4LifeContest.

This was also the first time Applebee’s extended a value promotion to be available via to-go, which Peyton said resulted in improved off-premises volumes while also maintaining a steady dine-in business.

Applebee’s weekly sales in Q1 were $54,700, with $12,000 of that coming off-premises, or 22 percent of total sales (10.7 percent from to-go and 11.4 percent from delivery).

That compared quarter-over-quarter from Q4 2023 to $54,000 and nearly $12,000, respectively (same 22 percent, split 11 and 11 percent from the channels).

The dine-in and off-premises combo, Peyton said, allowed Applebee’s to outpace Black Box category trends five times in Q1, including four times in the last four weeks of the period.

Peyton added Applebee’s pipeline will continue to drive steady news and give guests reasons to return. Recently, it unveiled a Whole Lotta Bacon Burger ($9.99) in April, announced a partnership with the NFL that started with 20 free boneless wings with a $40 online purchase during the league’s draft, and just last week brought back the Dollarita. Customers who dine-in can order the $1 margarita (tequila, triple sec, and lime) or add in flavors like strawberry or mango. The launch coupled with an introduction of a new app, Loaded Chicken Fries, which are tossed with crispy chicken tenders, Cheddar cheeses, Applewood-smoked bacon, ranch, and parsley, and served with a side of buttermilk ranch dressing. The Dollarita will run all May.

“The confidence that we have for the balance of the year is, because we’re moving the right direction,” brand president Tony Moralejo said.

A key to this approach, Peyton said, is these offers are designed to be profitable, not just traffic at the expense of margin. The last time Applebee’s ran the Dollarita, as an example, 90 percent-plus of the tickets included other items, “which is exactly what it’s designed to do,” Peyton said. “So we believe that as long as the promotions are constructed to drive profit as a standalone—to be profitable standalone—and then drive additional business, that is the strategy that we’re following in conjunction with our franchisees.”

CFO Vance Chang noted the Dollarita, as mentioned, is an upsell opportunity in of itself. There are different shots, flavors, additions that can bump margin alongside food attachment rates. “The point of it,” he said, “is to drive the lifetime value of that guest and increase the long-term market share of the brand. So we’re not giving things away. These are prudent, methodical, creative campaigns that we’re running.”

Additionally, Applebee’s rolled a new website and app in December. Peyton said it’s led to the highest conversion rates in two years. “In fact, we’re seeing a higher percentage of guests choosing to place their orders digitally as well as higher check averages compared to our prior site and app,” he said.

Applebee’s is in the midst of introducing a new freestanding prototype as well. The store is in Phase 1 of a nine-month effort, Peyton said, to “significantly take out construction costs.”

The chain opened two franchises in the quarter (both international) and closed eight units (five domestic and three overseas) for a net reduction of six restaurants. Applebee’s, which exited Q1 with 1,636 locations (1,531 in the U.S.) plans to retract by 25–35 in 2024.

Consolidated total revenues at Dine Brands, which also owns IHOP and Fuzzy’s Taco Shop, decreased to $206.2 million in Q1 versus $213.8 million in the prior year. Franchise revenues slipped 2.3 percent to $175.9 million. Adjusted EBITDA came in at $60.8 million, down from $66.4 million in the prior-year period.

Applebee’s commodity cost improved 2.4 percent versus Q1 2023, and the chain anticipates flat to low single digit deflation for the remainder of the year.

Casual Dining, Chain Restaurants, Feature, Marketing & Promotions, Menu Innovations