Applebee’s wants a refreshed footprint, and the company is stepping in to lead the charge.
The chain, previously 100 percent franchised, recently purchased 47 restaurants and will remodel 30 of them under its “Looking Good” reimaging program that launched in Q1. Another five will be converted into the new Applebee’s/IHOP co-branded concept (the first U.S. version debuted in Seguin, Texas, in February). Afterward, Applebee’s will refranchise the locations.
The company believes it can revitalize and refresh the restaurants and spin them back to operators in roughly three years—increasing the value of the stores in the process. Applebee’s also wants to demonstrate to franchisees what the remodel looks like, promote the ROI, and “put our money where our mouth is and do the same thing that we’re asking of our franchisees,” said Dine Brands CEO John Peyton.
“From time to time, opportunistically, we’ve got the ability to take back restaurants and we’ve done that in the last quarter, and we will do it again in the future if necessary,” said Peyton during the company’s Q4 earnings call. “The rationale for doing this is that in conjunction and in conversation with the franchisees, we felt this was a better path forward for these restaurants than if they remained in the status quo.”
Dine is offering remodeling incentives to early-adopting franchisees as well. Six of the top 10 franchisees, representing 57 percent of the system, have elected to accelerate remodels by the end of 2025.
Additionally, in Q2, Applebee’s will share more information on a new prototype, which will be more contemporary in appearance, built to facilitate the off-premises business, and be more cost-effective for franchisees. The first restaurant with this new design will be built in 2025.
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Applebee’s finished 2024 with 1,501 U.S. restaurants after losing a net of 35 stores. The brand expects its domestic footprint to lower by 20 to 35 outlets in 2025. Applebee’s comps are expected to range between negative 2 percent and growth of 1 percent.
The strategy is a long-term approach to improving the guest experience. In the near term, Applebee’s and IHOP have felt the full impact of macro headwinds on consumer spending.
Guests with household incomes under $75,000—who represent two-thirds of guests—were especially affected. Applebee’s and IHOP introduced LTOs and value-driven promotions, but the drag continued through the end of 2024.
Applebee’s comps fell 4.7 percent in Q4 and 4.2 percent in 2024. At IHOP, same-store sales decreased 2.8 percent in Q4 and 2 percent in 2024. Dine generated $239.8 million in adjusted EBITDA, down from $256.4 million in 2023. In Q4, it was $50.1 million, a drop from $62.2 million in Q4 2023. Revenues were down 2.3 percent for the full year and decreased 0.7 percent in Q4.
The solution is to dive even deeper into value. Applebee’s and IHOP will debut a new everyday value platform in the second half of the year to create a “more consistent value offering for our guests,” Peyton said. The menu will have new items and combinations that are appealing to singles, pairs, and groups/families. It should roll out in late spring or early summer.
Applebee’s will build out its 2 for $25 deal, which has been in place for more than 15 years. The chain will also innovate around its $9.99 Really Big Meal Deal that debuted late last year. The offer represented 20 percent of transactions in Q4 and boosted off-premises sales and ticket volume growth. It supported slight improvement in traffic and sales compared to Q3, particularly during the lunch daypart.
IHOP will lean into its $6 House Faves breakfast menu that debuted in October 2024. It’s currently available Monday through Friday from 7 a.m. to 10 p.m., but the brand is testing an expansion to seven days in Baltimore, Maryland; Oklahoma City, Oklahoma; Jacksonville, Florida; and Fresno-Visalia, California. The pilot began March 3 and will run through June 1. The menu will be available for dine-in and on the app, with the goal of a full-system rollout.
In Q4, IHOP’s traffic improved versus Q3 and outperformed Black Box for eight weeks out of the quarter, primarily driven by the launch of the House Faves menu. The chain supported the launch with enhanced media and creative efforts to highlight the value and pricing of breakfast offerings. The marketing resonated with consumers since more than 70 percent of IHOP orders include a breakfast item at any time of day.
In the fourth quarter, value and LTOs mixed 27 to 28 percent at Applebee’s (2 for $25 and Really Big Meal Deal) and about 17 to 18 percent at IHOP (House Faves and the 55+ Menu).
“While 2024 was challenging, we’re confident in the strength of Dine’s business, leveraging our strong cash flow, our scale, our resources, and our expertise,” Peyton said. “We will refresh our brand’s value offerings and core menu items. We will reinvest in growth initiatives and reinforce our brand’s unique value through improved marketing and storytelling.”
In addition to the everyday value platform, Applebee’s will prioritize marketing enhancement and menu innovation. The chain plans to significantly invest in digital and social media strategies and improve its media and creative capabilities to connect better with customers. The brand will also add new upgrades to its Club Applebee’s loyalty program. Menu innovation will focus on core items—like appetizers, handhelds, and beverages—through LTOs and permanent additions.
Meanwhile, IHOP plans to simplify restaurant operations by reducing product windows, upgrading back-of-house technology, and streamlining food preparation to improve speed of service and margins. The breakfast giant will optimize its media spend to create “bigger, more exciting moments to connect with guests and drive social engagement,” Peyton said. As part of the initiative, new IHOP president Lawrence Kim completed a review of the chain’s agency and production spend, which resulted in an almost 20 percent increase in working marketing dollars. The executive also expanded the brand’s internal creative and social media teams to “better capitalize on cultural moments to drive greater awareness and improve traffic trends.”
IHOP ended the year with 1,694 U.S. stores, down two compared to 2023. It projects between 10 net fewer restaurants and 10 net openings. Same-store sales are projected to range between negative 1 and growth of 2 percent.
