This year, IHOP has transitioned away from its pancake-focused identity, broadening its appeal with lunch and dinner offerings and a pilot program featuring a beer and wine menu.
Despite the changes, the Glendale-based restaurant chain said breakfast remains its bread and butter.
“The ‘Bubbles, Wine & Brews’ menu is an example of our ongoing commitment to innovation and to meeting guests’ evolving needs. This includes providing desired beverages with meals as well as elevating the dining experience for everyday occasions like daytime brunch and evening dining,” Kieran Donahue, chief marketing officer at IHOP, said in an email to the Business Journal. “In fact, a ‘Drinks and Dining Survey’ we conducted revealed that 66 percent of guests and 58 percent of younger guests (ages 21-34) have been craving an alcoholic beverage to accompany some of their IHOP favorites.”
IHOP, a unit of Dine Brands Global Inc. – which also owns Applebee’s Neighborhood Bar & Grill restaurants – began focusing on afternoon and evening offerings in 2018, with the launch of its Steakburgers menu. The restaurants, mostly operated by franchisees, briefly changed its branding from “International House of Pancakes” to “International House of Burgers,” abbreviated IHOB, in a marketing campaign designed to draw attention to its all-day offerings. It has since expanded its menus with buttermilk crispy chicken sandwiches and, within the last year, the launch of IHOPPY Hour, burritos and bowls, hand-crafted melts and its new extension into alcohol sales. The non-liquor menu expansion offers Barefoot wines and champagne, along with Bud Light, Blue Moon and Corona beers.
“In August 2021, we soft-launched a pilot program of the “Bubbles, Wine & Brews,” our first-ever nationally branded alcohol menu at five select locations. During this phase, we are piloting and testing to optimize the menu rollout and new offerings more broadly,” Donahue said. “Locations that are participating in the test include San Diego and New Mexico and will continue expansion to New York, Rhode Island, Maryland, Ohio and more to come in 2022.”
The updates come as IHOP is navigating changes seen since the pandemic, including fewer restaurants operating with 24/7 service, as well as a spike in off-premise sales. Prior to the pandemic, approximately 45 percent of IHOP restaurants operated 24/7. Since the pandemic, that number has trailed to 27 percent. The new menus, such as sandwiches and burgers, lend themselves to carry-out services, while alcohol sales may encourage guests to stay later into the evening and boost late-night demand.
“For the third quarter, off-premise sales accounted for 23 percent of sales mix, which is more than double the mix for the third quarter of 2019 and reflects significant retention compared to the same quarter of 2020, when restricted in capacity stricter indoor capacity restrictions and governmental mandates related to COVID-19 were in effect,” Jay Johns, president of IHOP, said in the company’s Q3 earnings call. “We believe we can retain most of our off-premise dollar volume and we’re confident that our strong off-premise business will be complemented by the demand for in-restaurant dining. For the third quarter, our sales mix consisted of 76.7 percent dine-in, 13.1 percent delivery and 10.2 percent to go.”
A representative for Blue Roof Franchise Association, a group of IHOP franchisees, did not respond to requests for comment on how franchise locations have responded to the menu expansion. While the move signals an overall brand shift to cater to a wider audience, Donohue said breakfast will remain at the heart of the chain made famous by its pancake offerings.
“IHOP is, and always has been, a leader in the family-dining category, with a strong commitment to innovation,” Donahue explained. “We will always provide our core breakfast menu items with additional twists to our classics, such as Cereal Pancakes and seasonal flavors, like our new Cranberry Vanilla pancakes. Breakfast is IHOP’s bread and butter. However, the prioritization of p.m. dayparts is helping us grow and be there for guests with new flavors and more elevated offerings in affordable combinations.”
Brand synergy
The shift away from a breakfast-only strategy has expanded IHOP’s potential market, bringing it into a similar category as Dine Brands’ other subsidiary, Applebee’s.
“They seem to be going a little bit more towards what Applebee’s has been doing for a long time,” Joy Shefter, founder and executive vice president of Miljoy Ent. Inc., a Beverly Hills restaurant consulting firm said. “And I think that’s a good thing because, with a similar business model, it’s going to be easier for them in terms of purchasing, finding vendors, those kinds of things. … The more they have in common, I think it’s easier for them to be able to have a good business model.”
In addition to menu changes, the IHOP brand has also expanded to include more to-go and fast-casual dining formats. In November, as part of its partnership with Ghost Kitchens Brand, the first IHOP “virtual location” in Toronto was announced. The order-ahead service and in-store kiosks allow customers to mix-and-match their single-transaction orders with favorites from 20 different restaurant chains, as all the food is prepared at the same “ghost kitchen” location. Also this year, several pilot “flip’d by IHOP” locations opened to test fast-casual service for diners on the go.
The flip’d concept by IHOP is different from the traditional sit-down experience guests have come to expect at full-service IHOP locations. At flip’d, visitors can order from a digital kiosk, directly at the counter or online for pick-up or delivery. The new fast-casual concept is meant to meet rising customer demand for on-demand service and off-premise dining.
“As part of IHOP’s larger growth and development plan, the concept meets guests’ needs of providing broadly appealing and familiar comfort foods that are portable and convenient made-to-order options, all at a great value, allowing guests to enjoy a new menu of IHOP-inspired favorites in a new way,” Donahue said.
Market reaction
While the changes expand the IHOP footprint and daypart relevance, the brand’s identity has remained salient for observers of the chain.
“What I like about what IHOP has done is they really stayed focused on comfort food,” Mark Moeller, a national restaurant consultant and founder of The Recipe of Success based in Westport, Connecticut, said. “Pancakes are a comfort food, breakfast is comfort food, and their burritos, their bowls, their burgers — it’s all about comfort food. It all fits within their brand and they didn’t go outside of it.”
Moeller noted that “yes, some of the ingredients are different, but what they’ve done is, they’ve stayed within their brand, they’re staying within their target demographic.”
Dine Brands’ stock is nearly the same price as a year ago. Shares closed on Dec. 1 at $70.17.
“This was another strong quarter for Dine Brands. We recorded a second consecutive period of both IHOP and Applebee’s beating their competitive sets, average weekly sales for both brands exceeded 2019 pre-pandemic levels, and we delivered a 48 percent increase in quarter-over-quarter EBITDA,” John Peyton, chief executive of Dine Brands Global, said in a Nov. 4 statement.
