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Applebee’s owner plots turnaround to lure back fast-food customers and home cooks

Applebee’s and IHOP owner Dine Brands thinks its deals can lure away fast-food customers who have grown frustrated with menu prices.

As consumers pull back their restaurant spending, Applebee’s and IHOP are fighting against a larger group of rivals than usual for a smaller pool of customers. Dine Brands CEO John Peyton said full-service restaurants, fast-food chains and even eating at home are all competing for diners’ dollars.

To rise above the competition, Applebee’s has been leaning into value with a slate of promotions that includes the return of Dollaritas, which makes Peyton confident that it can beat out the fast-food chains vying for its customers.

“The Whole Lotta Burger for $9.99 — if you can have our burger for $10, which is great quality, abundant and eat in our restaurant, in our experience, why would you eat a $10 burger out of a paper bag in your car?” he told CNBC.

Low-income consumers visited less frequently and spent more carefully when they did eat out in the first quarter, according to Peyton. Consumers with incomes under $50,000 account for about 40% to 50% of Dine’s customers, he said.

Dine Brands reported first-quarter earnings that fell short of Wall Street’s estimates, and both Applebee’s and IHOP’s same-store sales shrank more than expected. Still, Dine reiterated its full-year outlook and said sales have improved sequentially. Shares of the company closed roughly flat.

But it’s too soon to tell if Dine will succeed in winning over diners — and investors. The company will need to improve its same-store sales growth significantly to meet the full-year outlook it reiterated this year, Raymond James analyst Brian Vaccaro wrote in a research note on Wednesday.

Applebee’s isn’t the only casual dining chain aiming at McDonald’s and the rest of the fast-food category. Chili’s, which is owned by Brinker International, recently rolled out an ad campaign that calls out the Big Mac and other fast-food burgers for their prices.

And McDonald’s is certainly feeling the heat. CEO Chris Kempczinski told analysts on the company’s latest earnings call that “everybody’s out there with a value message,” which is why the chain is looking to create a nationwide value menu.

Besides leaning into deals, Applebee’s might also get an edge on the competition from a triad of recent pop-culture moments: a pivotal cameo in the tennis drama film “Challengers,” an Applebee’s-motivated meltdown on “Survivor” and a shoutout from football legend Peyton Manning during Netflix’s roast of his former rival Tom Brady.

Not since Beyonce name-dropped Red Lobster on her hit song “Formation” has a casual-dining chain felt so relevant in pop culture.

“It’s top of mind for so many people, and it’s because they’ve grown up with Applebee’s,” Peyton said.

This post appeared first on NBC NEWS
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