GLENDALE, Calif. – Executives of Applebee’s Neighborhood Grill & Bar hope to bring home the bacon with the Triple Hog Dare Ya, a new sandwich featuring pulled pork, ham, bacon and cheddar on ciabatta. The item is part of a new menu developed to recast the restaurant chain as a “modern grill and bar,” said Julia Stewart, chairman and CEO of parent company DineEquity, Inc., which also operates the IHOP brand.
“While we’ve seen some positive results, we recognize that it takes time to change perception, and we are on the right track,” Stewart said during a July 29 earnings call with financial analysts. “We are still in the early process and will continue to fine-tune our strategy as necessary. But make no mistake, we intend to break out.”
For the second quarter ended June 30, DineEquity had net income of $29,897,000, equal to $1.41 per share on the common stock, up from $19,167,000, or $1 per share, for the prior-year period. Earnings were driven by significantly lower interest expense as a result of a debt refinancing completed in late 2014 and higher gross segment profit as a result of increases in domestic same-restaurant sales at both brands and IHOP restaurant development over the past 12 months.
Revenues for the quarter totaled $171,549,000, up from $160,521,000 the year before.
During the quarter, domestic system-wide same-restaurant sales grew 1 percent at Applebee’s and 6.2 percent at IHOP, marking the latter chain’s highest quarterly increase in more than a decade.
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| Julia Stewart, chairman and CEO of Applebee's parent company DineEquity, Inc. |
“Of course, we remain committed to innovation at both brands and building a platform for sustainable growth, including a potential acquisition that is a strategic fit and does not compete with our two current brands,” Stewart said.
The new handhelds menu at Applebee’s includes a steak sandwich with beer cheese and fried jalapeños on ciabatta; a turkey sandwich topped with Swiss cheese, sriracha chile lime sauce and slaw on potato bread; and a grilled maple bacon chicken wrap. The sandwiches are served with free refills of french fries or house-made chips.
Earlier this year, Applebee’s introduced a new appetizers platform and Pub Diet menu, featuring classic pub-style dishes made healthier. Options include pepper-crusted sirloin with whole grains, shrimp and broccoli cavatappi, cedar grilled lemon chicken, and savory cedar salmon. The items contain fewer than 600 calories.
“There’s no question that the appetizers and the Pub Diet and all that had a substantial impact,” Stewart said. “I think it was like a 15 percent, 16 percent mix.”
More menu items are slated to launch over the next 18 months, she said.
The menu revamp, along with improving consistency and speed of service in the restaurants, is part of efforts to improve perceptions of the brand and increase traffic from Applebee’s current customers, Stewart said.
“The truth of the matter is there’s a lot of consistent users; we just want them to come back more frequently,” she said. “So it’s really getting people to come back more often as opposed to trying to go after people who have never been to an Applebee’s or haven’t been in 10 years type of thing.”
A strategy that does not figure into Applebee’s growth plan is aggressive discounting, which is used by many of its casual dining competitors, Stewart said.
“We believe in organic real value and price value and believe that discounting, well, first of all, it never pays,” Stewart said. “And our franchisees don’t make money that way, and we care about our franchisees’ profitability.
“And secondarily, we believe, over time, that denigrates the brand.”
