How DineEquity's CEO Is Transforming IHOP and Applebee’s
NEW YORK ( TheStreet) -- It's as if the entire "on-the-go" nation has grown obsessed with grabbing extra-large burritos from Chipotle
IHOP's system-side same-restaurant sales have increased for five consecutive quarters, rising 3.2% in the second quarter, while Applebee's rose a more modest 0.6% but halted three quarters of declines. Darden's Olive Garden has posted four quarters straight of same-restaurant sales declines, capped by a 3.5% fall in the most recent quarter. Chili's had a 2.5% same-restaurant sales increase in the second quarter.
Applebee's has outperformed the same-restaurant sales industry average by 150 basis points in the past five quarters, according to Bloomberg.
However, investors do need to be reminded of the healthy sales being logged at the fast-casual chains, which provide evidence of the robust competitive dynamics in the evolving restaurant industry. Chipotle's second-quarter same-restaurant sales increased 17.1%; Starbucks U.S. rose a solid 7%.
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Propelling the comeback for two of the most prominent sit-down dining chains in the country is a streamlined menu at IHOP that better highlights new offerings, and a menu at Applebee's that is about 95% new or improved relative to just a few years ago. Supporting the menu initiatives has been an industry-leading marketing budget -- the combined marketing spend for both Applebee's and IHOP is between $250 to $265 million a year.
On the heels of DineEquity launching its latest innovation -- a waffle platform at IHOP -- as well as a fresh design concept for the brand, TheStreet talked exclusively with the company's chairman and CEO, Julia Stewart.
Brian Sozzi : IHOP has had quite the year in terms of sales growth, which caught my attention given the heightened competition in the breakfast category from quick-service formats, and even new offerings from packaged-food companies. What have been some of the specific drivers behind IHOP's sales results?
Stewart: There is no question the breakfast space has gotten even more competitive in the last couple of years. We have put considerable effort and talent in innovating both the items on the menu and reinvigorating the actual design of the menu. We have streamlined the menu, eliminated items, added new items, and used photography for each of our entrees. We probably had appetizers on the menu for 20 years but it wasn't a highlighted category; it was hard to find.