Applebee’s hasn’t put the same level of investments into its restaurant as Chili’s and its franchising model makes revitalization efforts more…
For the first time, Chili's overtook Applebee's in terms of U.S. systemwide sales in 2024, according to Technomic.Data from the restaurant tracking firm shows that from 2021 to 2024, Chili's grew U.S. sales from about $3.
6 billion to $4.6 billion, while Applebee's $4.1 billion U.S. sales were about flat over that same time period."When you look at the long-term historical performance of the brands and their future potential, the stock at the moment is not anticipating what we think are the fundamentals of the company and the potential for growth," said John Peyton, CEO of Applebee's parent company Dine Brands."Getting back to positive same store sales growth could be a huge catalyst for the stock," said KeyBanc Capital Markets senior restaurant analyst Eric Gonzalez. 53-year-old's career survived the Dotcom tech crash—her advice for people working in AI now: ‘Don't be a fraud' "Investors tend to like asset light businesses because the earnings volatility is very small," Gonzalez said."That's why the asset light model works for a public company, but in terms of Dine Brands … it just doesn't have a lot of attention because there aren't many franchised, full-service businesses to compare it to.", to quickly execute system-wide turnaround initiatives. In 2024, it increased its spending on labor by 34% and increased spending on restaurant expenses, including advertising, maintenance and repairs, by 28%. "The franchisee model is great as far as financial engineering. It allows the company to get really low costs of financing. They securitize the franchisee revenues. But the downside to that is you don't have operational control," said Debtwire's Global Head of Credit Research Tim Hynes. Dine Brands is working to get back to growth. The company said it plans to have all its locations remodeled over the next three years. It is offering financial incentives to franchisees that are early adopters of its remodeling initiative. "We have the ability contractually to force things," Peyton said."But when it comes to renovations, I think the best thing we can do is demonstrate that a refreshed restaurant makes more money. And so that's why we're renovating 30 ourselves this year, so we can show to the franchisees we spent this much money to renovate it and here's the lift we got." Dine Brands is also rolling out IHOP and Applebee's combination restaurants. The first U.S. location opened in Seguin, Texas, in February. "It was $2 million a year in sales, IHOP, and it's now running at a rate of $6 million a year adding an Applebee's. And so that franchisee alone, based upon those results, committed to opening eight more," PeytonDine Brands has cut around $1 million off the cost of building a new restaurant to encourage franchisees to open new locations. "Traffic was softer than we would like it to be in 2024. That being said, I'm very excited about where the future holds us," said Tim Doherty, president of Applebee's franchisee Doherty Enterprises."I truly believe that we will figure it out and be successful long term."Celebrity News
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