Applebee’s and IHOP’s new recipe for success: technology, takeout and takeovers

With free birthday breakfast meals and all-you-can-eat riblets, t​​​​he IHOP and Applebee’s restaurant chains became a traditional stop for millions of American families seeking a feast.

But casual dining restaurants began to lose their appeal for millennial-generation foodies, and in 2016, Applebee’s tried to update its image.

The restaurant got rid of its signature riblets and other items and introduced more upscale options, including steak cooked on wood grills that were newly installed in restaurants. The move quickly backfired. In the first three months of 2017, Applebee’s’ same-store sales — sales at restaurants open at least 18 months, a key measure of performance — dropped 7.9% from a year earlier, said Stephen Anderson, a Maxim Group analyst who focuses on casual dining restaurants.

IHOP saw a 2.1% decrease in same-store sales that quarter, which reflected the slump overall at fast-casual restaurants. And the numbers kept slipping. “We lost a little relevance with our customers,” said Stephen P. Joyce, chief executive of DineEquity Inc., the Glendale company that owns IHOP and Applebee’s. “We forgot what the customer expects from us and got a wake-up call.” Joyce, who joined the company in September after a decade leading Choice Hotels, has a plan to turn the business around over five years.

The company is adding technology to make ordering more convenient, Joyce said, and is paying more attention to “off-premise dining,” — that is, takeout orders, often handled by food-delivery services.

DineEquity also wants to expand by acquiring other restaurants, particularly in the fast-casual segment. To reflect the effort, DineEquity Inc. changed its name Tuesday to Dine Brands Global Inc.

DineEquity and the rest of the casual-dining segment of the industry has had a difficult couple of years, partly because restaurant growth has exceeded population growth and demand for those types of restaurants, said Victor Fernandez, executive director of insights and knowledge for TDn2K, which tracks the restaurant industry. Overall, casual dining restaurants suffered a 1.3% decline in same-store sales in 2017 compared with the year before while the bar-and-grill segment, including Applebee’s, fared even worse with a 2.5% drop.

Several casual dining restaurants also misjudged the market and implemented changes that scared off core customers, Anderson said.