Applebee’s franchisees view 2022 as a meaningful market-share opportunity, president John Cywinski says, and they’re not just referring to the casual-dining industry.
Because of pandemic-related changes, the chain is as close to the quick-service segment as it’s ever been. Applebee’s customer demographics—age, ethnicity, etc.—is more reminiscent of fast-food and fast-casual players than its full-service peers. Gen Z, millennial, and Gen X now account for 80 percent, with millennials (34 percent) as the largest. The quick-service comparison is also true for Applebee’s guest income profile, which is $75,000 per household.
Another point: In seven of the past eight months, the price of quick-service meals rose at a higher pace than full-service menu items, according to the Bureau of Labor Statistics. And Applebee’s average check is already on the lower end of the casual-dining spectrum.
Cywinski says a decade ago, the chain wasn’t top of mind for consumers coming home from work and looking to relax. The brand marketed against that “pretty hard” in the past five years, and has now reached the desired awareness level, the executive notes. Off-premises, which resulted in $1.2 billion in 2021, mixed 28 percent in the first quarter.
“You get great packaging, you get really great food, real food—not a burger, fries, and a Pepsi in a sack from a [quick-service restaurant],” Cywinski says. “Then it travels well, and it doesn’t cost all that much more. With locations across the country, if you choose to go pick it up yourself, it’s likely right around the corner. If we were a 400-restaurant brand in casual dining, I’m not sure we’d have that level of convenience or relevance. But we’ve got 1,575 restaurants, so it’s quite natural to aspire to be a top-of-mind consideration among those fast, convenient, don’t-have-time-to-sit down-and-dine occasions, and we play really well.”
Applebee’s same-store sales rose 14.3 percent in Q1, year-over-year, representing the chain’s fifth straight quarter of positive momentum. That breaks down to 17.6 percent in January, 25.1 percent in February, and 5.5 percent in March as the brand lapped stronger comps.
Given Omicron’s impact, January saw $46,800 in average weekly sales per restaurant ($2.4 million annualized AUV), but February and March jumped to $54,800 ($2.8 million AUV) and $57,600 ($3 million), respectively. In fact, March was Applebee’s best-performing month since it entered the Dine Brands family in 2007.
In the first quarter, dine-in sales mixed 72 percent and reached 90 percent of pre-pandemic volumes. Cywinski expects a continued tailwind from Applebee’s improved late-night business and the gradual return of older guests.
The chain’s 28 percent off-premises mix was split evenly between carside pickup and delivery. Roughly 70 percent of Applebee’s carside orders are digital, and that includes online platforms and a proprietary call center, which is currently used by more than half of the U.S. system.
The goal is to reach 100 percent digital ordering by the end of 2022, and that means connecting the rest of the footprint into the call center. Customers using online ordering platforms or the call center come with a higher average check as opposed to regular phone calls, Cywinski says.
“It’s really not the core competency of a restaurant team member to be picking up the phone and taking an order and transacting that order, taking a credit card and all of that,” he says. “And so when I get to 100 percent digital, I free those team members up to focus on in-restaurant execution, which pays meaningful dividends for us, and then they’re great at that. Whereas, if you were to pick up your phone and on a Friday evening at 6:30 p.m., you may not have a great phone experience. Might be a team member who’s in a rush, it might be several rings before it’s picked up, it might be a bartender.”
After spending roughly five years closing about 300 underperforming restaurants, Applebee’s is projected to fall just short of U.S. net unit growth in 2022, but reach the mark in 2023. It plans to open six traditional locations and six ghost kitchens this year and close fewer than 15 stores—its lowest number of shutters in 10 years.
Applebee’s ended the first quarter with 1,575 U.S. restaurants.
In preparation for this rise in development, Applebee’s has spent the better part of two years developing a new prototype. Cywinski describes it as a cost-engineered, modernized store design that’s not radically different from what’s seen today—there’ll still be the classic tower, the bar will remain the centerpiece, and the square footage will be roughly the same.
A handful of recently opened restaurants feature some, but not all of the components. In these stores, guests of all ages have validated the improvements, Cywinski says. Locations with all changes should pop up toward the end of 2022, and certainly in 2023.
“We haven’t compromised anything on the guest front in terms of design, décor, size,” the brand president says. “We’ve just optimized a few areas back of house, kitchen, front of house, dining room—just some measures that some really smart designers and architects helped us with to make this even more efficient, and that’s probably the word I would use. It’s a more efficient prototype. It looks great for the guest. It’ll just operate even more efficiently for our franchise partners.”
Cywinski hopes a good portion of Applebee’s future growth will include drive-thru pickup windows, in lieu of carside pickup. There are four converted locations in Arkansas, Texas, South Carolina, and Virginia. The new asset, which costs roughly $100,000 to $250,000 depending on market, allows stores to offer off-premises later into the night and protects employees from unfavorable weather. There should be 15 drive-thru pickup windows built by the end of the fiscal year.
Cywinski isn’t sure how many conversions would be possible among the nearly 1,600-unit footprint, but he prefers it be at least half, if municipalities allow for it. He’d also love for new prototypes to have the drive-thru window, too.
“If 5 percent of my business was off-premise, I don’t think I’d have a keen interest in doing this,” Cywinski says. “With 28 percent of my business being off-premise and then that’s a $1.2 billion brand in effect. That’s larger than some of my smaller competitors in total. It’s meaningful, and we’re not just in the off-premise business to compete. We’re in it to win, and we want to really provide a great experience for our guests. So the easier we can make it for our guests and our team members, the better, and that’s our mission.”
This is Cywinski’s second stint at Applebee’s. For five years in the early 2000s, he worked as chief marketing officer, and at that time, he said the company was building 100 restaurants per year and comp sales were “off the charts.” Many, including himself, refer to those times as the glory years.
With a fully optimized portfolio and customers eager to dine out, Cywinski is confident Applebee’s has recaptured that magic.
“We’re very bullish on the future,” he says. “The brand couldn’t be better-positioned, and I’m excited for what that means for our franchise partners.”