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Dine Brands Profits by Fixing Guest Experience

Dine Brands Global Inc. had a strong first quarter, a reflection of the long-term strategy taken by management to drive growth. The Glendale-based franchisor of International House of Pancakes and Applebee’s Grill & Bar restaurants has addressed every aspect of the guest experience, management said. In a conference call with analysts to discuss quarterly results, Chief Executive Stephen Joyce said this strategy includes how guests engage with the brands, meeting convenience needs either in or outside the restaurants and meeting expectations through innovation. “Our holistic strategy has provided a solid foundation to drive positive performance and has led to marked improvement in results for both Applebee’s and IHOP,” Joyce said. For the quarter ending March 31, Dine Brands reported net income of $31.6 million ($1.73 a share) compared with net income of $17 million (92 cents) in the same period a year earlier. Revenue increased by 26 percent to $237 million. Shares closed at $92.91 on June 5. Dine Brands is the largest operator of full-service dining restaurants in the world, with more than 3,400 domestic locations and 250 locations internationally. It makes its revenue primarily through franchise and rental fees. Nick Setyan, an analyst in the Los Angeles office of Wedbush Securities, wrote in a recent research note that he forecasted same-store sales at Applebee’s in the quarter-to-date would be flat. That is not seen as a negative given low investor expectation and an upcoming promotion that could impact the second half of the second quarter. “Drivers of (same-store sales) growth for the year at both brands remain the continued focus on abundant value, menu/beverage innovation, growth in ad spend and further expansion in (delivery and pickup orders),” Setyan wrote. Stephen Anderson, an analyst who follows Dine Brands for Maxim Group in New York, however, pegged comparable store sales at a higher rate. He forecast a comp range of 2 percent to 4 percent for both IHOP and Applebee’s for the second quarter on May 1. In the first quarter, he estimated that comps were in the 2 percent to 3 percent range in January and March but fell to flat to 1 percent in February as winter weather affected diners. “We believe the weaker-than-expected comps are concerns, particularly given that quick service chains that have reported 1Q19 results to date noted a more pronounced sales rebound in March than have casual dining chains (like Applebee’s and IHOP),” Anderson wrote in the report. John Cywinski, president of Applebee’s, noted in the analyst call that February was an anomaly “largely due to unfavorable weather and the absence of an overt value proposition, which we did have in January with all-you-can-eat and in March with (a) three-course meal.” Darren Rebelez, then-president of IHOP, noted on the call that same-store sales rose in the first quarter by 1.2 percent. The delivery and pick up business, as well, continued to be a strong contributor to the chain’s sales growth, he added. In the first quarter, off-premise business was 9 percent of total sales, compared to 5 percent in the same period a year earlier. “We believe to-go can increase to the low teens as a percentage of total sales over the next few years,” Rebelez said in the call. On June 3, Rebelez left IHOP and was replaced by Jay Johns, who had been senior vice president of operations for the chain since 2017.

Mark Madler
Mark Madler
Mark R. Madler covers aviation & aerospace, manufacturing, technology, automotive & transportation, media & entertainment and the Antelope Valley. He joined the company in February 2006. Madler previously worked as a reporter for the Burbank Leader. Before that, he was a reporter for the City News Bureau of Chicago and several daily newspapers in the suburban Chicago area. He has a bachelor’s of science degree in journalism from the University of Illinois, Urbana-Champaign.
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