From eggs Benedict to biscuits and crepes, IHOP refreshed its menu several times this year and is reaping the benefits. In April, it rolled out its biggest menu update in the company’s history with over a half-dozen items added across breakfast, lunch, dinner and late-night dayparts. In August, the chain went further by adding biscuits to its permanent menu with six new items that also spanned across dayparts.
“IHOP’s got the most current and contemporary and thorough breakfast-brunch menu that it has had in a decade, and that’s why you’re seeing the strong comp sales this quarter,” Dine Brands CEO John Peyton said.
During the third quarter, IHOP same-store sales rose 2%, with average weekly sales reaching over $37,000, according to an earnings release.
Dine Brands hopes to bring similar successes to Applebee’s and Fuzzy’s Taco Shop, which are in the midst of testing new menu items they plan to roll out in future quarters. Several other casual chains, including Red Robin, Denny’s, TGI Fridays and Chili’s, revamped their menus this year in a ploy to appeal to younger demographics and drive traffic.
“I think it is important to keep a brand fresh, particularly brands that have been around for as long as [Dine has],” Peyton said. “The bottom line is we want to be relevant to our guests and we do that through menu innovation.”
Leaning into menu refreshes
IHOP’s latest menu additions have been successful. In fact, the biscuit launch, which was originally an LTO, performed so well that the chain added the items to its permanent menu in September, Peyton said.
The chain also expanded its waffle category, which is one of its top-selling menu items, with the addition of its Nashville Hot Chicken and Waffles during the third quarter.
IHOP introduced pancake tacos in July, as well, and sold 2 million pancake tacos in four weeks and garnered a billion social media impressions about the items, Peyton said.
In August, IHOP celebrated its 65-year anniversary with several promotions, including all-you-can-eat pancakes for $5, free meals for kids under 12 and a loyalty program offer of a free pancake combo for new members. IHOP’s International Bank of Pancakes program, which is now 18 months old, grew to 7 million members during the third quarter and has been helping drive traffic, as well,
“The data we’re collecting from our [IHOP] loyalty program enables us to methodically plan promotions and menu offers that are most likely to appeal to our guests,” Peyton said during the company’s earnings call. “As a result, we continue to see the brand gaining traction among the younger demographic.”
Applebee’s has a new menu forthcoming that could help turn around same-store sales declines.
Applebee’s same-store sales fell 2.4% in Q3 largely due to lapping strong comps from the year prior and the price-sensitive consumer environment, Dine Brands CFO Vance Chang said during a November earnings call. Applebee’s average unit weekly sales were over $62,000.
Applebee’s menu updates will start rolling out next year following the chain’s hire of Chef Shannon Johnson as VP of culinary in September. He previously worked at Applebee’s from 2003 to 2012. The culinary team is testing 200 concepts that not only includes an expansion of categories but also will include some new categories as well, Peyton said. Dine expects to see new items appear on the menu or as LTOs starting next year.
Applebee’s is seeing positive momentum with menu items that it has rolled out this year. The chain’s All You Can Eat Boneless Wings LTO returned in August and helped drive quarter-over-quarter traffic improvements and brought in younger guests, Applebee’s President Tony Moralejo said during the company’s November earnings call.
The company also brought back Dollaritas in October for a limited time. While the impact of this beverage will be revealed as the fourth quarter progresses, Moralejo said that 93% of all transactions with Dollaritas included the purchase of a food item.
“Every time [guests] visit, they want great value and they want great experience and Dollarita delivers on both,” Moralejo said. “You’ll continue to see opportunities to innovate with best-in-class marketing campaigns.”
Fuzzy’s Taco Shop is also in the midst of a new Baja Strategy, which was unveiled in September at the chain’s annual franchisee conference. The strategy is a comprehensive plan “that takes the brand back to its roots, embracing the Baja lifestyle and cuisine,” Peyton said.
Fuzzy’s plans will include new restaurant design elements, a menu refresh and enhancements to the overall guest experience. Testing will begin in the fourth quarter with a full national rollout expected in Q1 2024.
The first item will be the Baja fish taco, which has light beer-battered fish and coleslaw, Peyton said. New design elements will be added to existing and new restaurants, but Peyton declined to share any specific details.
“We know that our guests like and value what they come to expect from our brands,” Peyton said. “So they like consistency, and they also like the surprise of something new.”
Appealing to price-sensitive guests
Dine’s consumers, which have average household income of $50,000 to $100,000 are dining out less, Peyton said. Credit card data shows that these customers are reducing their spending moderately at quick-service brands, which has taken significant price hikes across the segment since 2019.
Limited-service restaurants increased prices by 6.2% as of October compared to October 2022, while full-service restaurant prices rose 4.3%, according to consumer price index data from the U.S. Bureau Labor Statistics.
Although traffic is down at Applebee’s and IHOP, average checks have remained steady the past few quarters despite price increases, Peyton said. Pricing was up 8% for IHOP and 4% for Applebee’s year-over-year during the quarter.
Dine’s franchisees typically increase prices 2% to 3% each year, but in the last two to three years post-COVID-19, the price hike has been higher due to rising costs. The company expects pricing to normalize over time, however, Peyton said.
“The key point is that when choosing between dining options, it appears that the experience [of] full-service, the environment that they expect from an Applebee’s and IHOP is still appealing,” Peyton said. “When our guests want to dine out, they want to get the value that comes with not only our menu and our abundant food and pricing, but also the experience itself.”