Dine Brands at Barclays consumer conference: dual-brand push gains pace

On Wednesday, Dine Brands Global, Inc. addressed the Barclays 19th Annual Global Consumer Conference, highlighting its focus on dual-branded restaurants, value offers, and operational gains for its IHOP and Applebee's brands. The company also mentioned several challenges such as beef inflation at Applebee's and the need to maintain rising foot traffic while managing a large franchise system with about 5 times leverage.

Dine Brands disclosed that its dual-branded Applebee's and IHOP format has become a significant growth engine, with 45 locations currently open and about 80 expected to be operational by the end of 2026. The IHOP brand continued to exceed Black Box Intelligence benchmarks, achieving a third straight quarter of comparable sales growth and six consecutive quarters of traffic growth.

Applebee's remodel program has been successful, with over 400 restaurants completed and sales lifts ranging from 5% to 15%. Management emphasized that value menus remain crucial for driving traffic, while premium items and upgrades contribute to profitability.

The company's portfolio includes approximately 1,550 Applebee's units, 1,800 IHOP units, and 110 Fuzzy's Taco Shop units, with 240 of those being licensed units outside the United States. Dine Brands follows a three-pronged strategy focused on improving same-store sales, expanding dual-branded restaurants, and maintaining a flexible capital structure.

Dual-brand locations, which combine Applebee's and IHOP in one space, are designed to maximize space efficiency across breakfast, lunch, and dinner, generating 1.5 to 2.5 times the revenue of standalone restaurants.

Management estimated that adding a second brand to an existing restaurant would require around $1 million in incremental investment, with higher costs for adding Applebee's to an IHOP due to bar build-out needs. New dual-branded restaurants are projected to generate annual unit volumes above $3 million, with a range of approximately $4 million. Dine Brands identified around 900 long-term dual-brand opportunities, evenly split between new builds and conversions of existing restaurants.

During the conference, CEO John Peyton emphasized that the dual-brand format has gained credibility as experienced franchisees are investing in it. He noted that large operators converting locations viewed the format favorably, indicating its growing acceptance. Management spent much of the discussion explaining how value offers support traffic without dominating the profit driver.

At IHOP, the $6 everyday value menu represents about 20% of sales, while Applebee's value mix is around 25%. About 65% of Applebee's 2 for $25 orders are upgraded with premium proteins, resulting in actual transaction prices ranging from $28 to $36, depending on market and franchisee choices.

Dine Brands stated that franchisees have raised prices by 2% to 3% while maintaining relatively steady average check sizes. Lower-income guests have seen a slight decrease, while higher-income guests and consumers trading up from quick-service restaurants have helped offset this shift. The company also mentioned that value offers aim to drive traffic, while premium items and beverage sales support margins.

Applebee's has increased prices below food-at-home inflation rates, while IHOP has risen slightly above it. IHOP remained the top performer in the portfolio, outperforming Black Box Intelligence comparable sales benchmarks for the third consecutive quarter and traffic for the sixth consecutive quarter. Table turn time improved by more than 4 minutes since December, and to-go order accuracy has increased through tablet technology and kitchen display systems.

Back-of-house operations have been streamlined to boost team efficiency. IHOP's success depends on balancing value with new offerings, such as product launches, marketing, and experience-driven buzz. Management highlighted IHOP's broad appeal to various occasions and Applebee's ongoing remodel cycle, which is expected to refresh the brand after a long hiatus.

About one-third of the Applebee's system will be renovated by year-end 2026, with the goal of reaching 50% by the end of 2027. Over 400 Applebee's restaurants have already undergone remodels, showing sales lifts of 5% to 15%. Beef cost inflation has put pressure on margins, and Applebee's continues to focus on menu innovation and brand-specific promotions, such as the O-M-Cheese Burger and Dubai Chocolate Pancakes, to differentiate itself in the competitive casual-dining market.

Fuzzy's Taco Shop, the smallest brand in the portfolio, has started to stabilize after a menu and operator reset, posting two straight quarters of positive comparable sales. The brand has revamped its menu with better protein quality and updated recipes, and the franchisee base has shifted toward experienced operators, positioning it for future expansion.