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Thursday, Mar 28, 2024

DineEquity Adds New Businesses

A deal to open 24 IHOP franchise restaurants in the New York metropolitan area with a flagship location in Times Square is the tail end of an active year of expansion for the chain’s parent company DineEquity Inc. On Dec. 9, IHOP announced that it entered into a multi-store development agreement with Trihop LLC to franchise the new restaurants in areas including Manhattan and Queens; Fairfield, Conn.; and the New Jersey counties of Bergen, Essex, Morris and Union. “We’re expanding in to areas where we haven’t had locations, and Manhattan is a great example of that,” said Patrick Lenow, DineEquity’s executive director of corporate communications. “We currently only have one restaurant in Manhattan. We think obviously (Times Square) is one of the most intriguing and interesting areas in the world, and we think it will be able to serve both the locals and visitors to the area very well.” The announcement followed other news of expansion by DineEquity this year. In November, IHOP reached a milestone by opening its 1,500th location, a franchised restaurant located at the new DC USA shopping center in Washington, D.C. IHOP also recently unrolled plans to expand its non-traditional restaurant market. The chain plans to open IHOP Express restaurants at the Naval Base San Diego, following the opening of a similar smaller-scale restaurant at the Naval Station Norfolk. IHOP Express restaurants, which have a counter-service focus, are also set to open at five college campuses in a deal with food and professional services company ARAMARK. One of the express locations already exists at the University of Texas, Knoxville, and one of the five new sites will be located at Virginia Commonwealth University. “We’re expanding through nontraditional locations to bring IHOP to those people who might not be able to regularly get IHOP,” Lenow said, describing sites they are expanding to as “captive locations,” where consumers might not easily be able to leave the area to dine. “The bigger part of it is the strategy of making it more accessible and convenient.” Meanwhile, DineEquity continues expanding its traditional IHOP restaurants. By the end of the year, the company will have opened 60 to 70 locations, with 300 more franchises in the pipeline. Applebee’s Growth The company’s other restaurant chain Applebee’s Neighborhood Grill & Bar has seen high levels of activity this year as well. In line with the company’s goal of making its chains more highly franchised, DineEquity has been continually franchising out company-operated restaurants. The company has sold 193 company-operated Applebee’s restaurants since it acquired Applebee’s International in November 2007, with nearly half of those transactions being completed this year. Additionally, the sales of 66 additional restaurants are expected to be completed early next year. When those sales are completed, DineEquity’s restaurants will be 93-percent franchised, an increase from 88 percent as of Sept. 30 of this year. While IHOP has been around for 52 years, the parent company DineEquity was not formed until 2007 when the Applebee’s International chain was acquired. Since then, the company has worked on remodeling the Applebee’s chain. Financial Success DineEquity appears to be taking more market share from its competitors, financial analysts say. DineEquity’s stock price has shot up. On Dec. 15, its price closed at $52.18, which is a 142.1-percent increase from the year before. The company also showed positive gains in its third quarter for same-restaurant sales for both chains. Greg Reudy, vice president and equity research analyst for Stephens Inc., said DineEquity’s refranchising efforts and its recent debt recapitalization have been the greatest catalysts for the company this year. The company’s strategy implementation has also been a help. “There’s been some changes, especially on the Applebee’s side, that have materialized that agree with the strategy that has been announced by the company in the past,” Ruedy said. “It’s a few main steps that the company discusses which was improving and enhancing food, tightening up operations for both company-owned and franchises, and having marketing to support a better guest experience.” Destin Tompkins, restaurant financial analyst for Morgan Keegan & Co., said he also sees the company going in a positive direction. “It’s been a steady performer, even through the recession,” he said, adding that he also saw the company’s decision to refinance as a smart business decision. “A lot of pieces are coming together all at once, and I think there’s a good runway of momentum that we have left, and we will likely see continued improvement over the next couple of quarters.” Tompkins said the company has been outperforming others in the industry over the past couple of quarters, particularly with Applebee’s, which he said is taking market share from competitors.

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