Applebee's, IHOP see sales slump as consumer wallets tighten

Dine Brands' (DIN) latest quarter saw same-store sales fall year-over-year across its brands like Applebee's and IHOP, signaling a shift in consumer dining habits. Dine Brands CEO John Peyton joins Market Domination to discuss the company's earnings and the weight of inflation on American households.

"It was a tough quarter for our brands as well as for the industry overall," Peyton tells Josh Lipton and Brooke DiPalma. Dine Brands saw a decline in the frequency of consumers who earn $50,000 or less annually, largely due to inflation driving more cost-conscious behaviors. When these consumers did come into Dine Brands' restaurants, it was often during promotions, which Peyton explains signals a "value-driven moment for the restaurant industry."

Dine Brands is also rolling out new initiatives to automate certain functions and features of its restaurants. "We're not a technology company. We're a restaurant company that embraces technology, and our technology is all about helping our servers or our back-of-house staff be more efficient," Peyton says, highlighting a new point-of-sale system at IHOP that allows servers to spend more time with guests and also turn tables around faster.

While the company is embracing these technology advancements, Peyton stresses that phasing out human workers is not an objective. "Our guests are not the highest earners in the country. And when they choose to spend $35, which is the average check at Applebee's, that's a big decision for them, and interacting with another person serving them is a big part of the experience," he explains.

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This post was written by Melanie Riehl

Video Transcript

The consumers are pulling back on dining out.That's according to Dyn Brand's latest core.The race restaurant company saw same star sales fall year over year across its brands, including Applebee's and IHOP Dyn brands.Recognising that Guess our laser focus right now on value as inflation we know continues to weigh on households with more on the state of the consumer.We're joined now by DY Brand CEO John Payton alongside Yahoo Finances Brook, Um, welcome to you both, John.Thanks for joining us.Thank you.So it looks like Let's just dig right into the report.John, it looks like you want profit sales.Maybe F fell more, uh, than the street was looking for.You did, though, reiterate full year looks like sales guidance for Applebee's IHOP.Maybe just start, John.Walk us through the quarter.What are the big trends you're seeing, sir?So it was a tough quarter for for our brands as well as for the industry overall and driven by two things.The first was there was some weather issues in the beginning of the quarter, but but most importantly, we've been talking for six quarters now about when will the inflation and sort of the economic situation in the US permeate the psyche of of our guests.And we really saw that in the first quarter in a in a significant way, uh, particularly for our guests that earned $50,000 or less a year, which is 45% of our of our customer.And so the behaviour we saw was they.They went out to dine a little bit less often, and when they did come into the restaurant, they found they were managing their check and and making sure they were really finding our value oriented promotions.And so it really is a promotion value driven, uh, moment for the restaurant industry and for us particularly, uh, and with it'll be that way all year, it'll be a fight for share of wallet, you know, all all year.In April, you did launch that whole lot of Burger.We were chatting about it before, but how is it going so far?It's 999.And do you think that these sort of promotions these are of value offerings are bringing customers from, say, a McDonald's or Burger King who are looking to dine out on a dime.Well, that's that's It's an interesting moment right now, Brooke.So we we introduced a new menu innovation, which is the whole lot of bacon burger.The bacon is in the burger, the bacon is on top of the burger and there's a bacon sauce.It's a whole lot of bacon for an introductory price.We just heard of that.I know what to bring next time, Um, and so and for for 999.And you know, what we're seeing is, you know, we're seeing a, uh, a sort of a collapsing or commingling of our competitive set in a way we haven't seen before.And that, um, you know, QSR is is something that's on our radar screen as a competitor now and even eating from home, because if you can get the whole lot of Bacon Burger, which is abundant, great quality and the terrific experience of being in our restaurant with our service for 10 bucks, that's a great alternative to, you know, a burger in a bag that's eating out of your car, right?And so suddenly we we have a sort of a broader landscape, and and while we may have some guests who are trading out of our of our space.We have an opportunity to win others back because of price points like that.John, I have to ask.Bacon and beef are two items that are set to see higher commodity costs yet again this year.Why not launch a chicken value promotion instead?Have me back next quarter.Maybe we can talk about that.Oh, good to know.Good to know, John.Another question.How much are you focused?Right on.Automating kind of tasks and functions and features in your restaurants.Is that Is that a focus?It is.You know, we we're very careful to say we're not a technology company.We're a restaurant company that embraces technology.And our technology is all about helping our servers or back of house staff be more efficient, you know?So so a great example is we just rolled out a brand new point of sale system to all of IHOP.Finished it just in the last month or two.And what comes next is handhelds for servers, and so the handhelds prevent servers.Take your order on paper, run back to the point of sale system.Enter it come back to the table.And so they're They're spending more time with their guest as a result of that.And so we're seeing, uh, faster table turns.We're seeing higher average check because they're selling second beverages offering their appetiser and more tips for our servers.Could I ask you, John, as you as you do, automate though more tasks and functions.Could you get to a point where the human server, you know, the person filling my coffee bringing my pancakes?Could that get actually just phased out?Not our not our objective, not our plan.I mean, we We are a full service restaurant at Applebee's at IHOP and and and at Fuzzy's Taco Shop.And so coming to us.Part of it is the experience of being in the restaurant and interacting with another human because, um, as I said, you know, our guests are not the highest earners in the country.And when they choose to spend $35 which is the, you know, the average check at Applebee's, that's a big decision for them and in interacting with another person.Serving them is a big part of the experience.And when you think about how exactly these customers go and pay.You know, many are using these tablets.They run around.They have the automated system to pay.Why did you choose to use that?Virtual.It sounds like a permanent tablet at each table.No, it's not.It's not, um, based.It's not attached to the table, like like in the airport for essentially a server.It's a handheld so they can take the order on the handheld.It goes directly to the K, the kitchen management system.It appears for the fears for the cooks, and then they can also, um, swipe out.And you can.You can charge your credit card on the on the device as well.Is that host technology or No, it's tre technology.So the company is called Tray, where we are, um, one of their largest clients, and we've been building our version of tray with them directly.It's been in very good partnership.Very good stuff, I. I do want to quickly ask about these virtual brands.We saw IHOP sales decline one point 7% but you're saying that you see an opportunity with these virtual brands, describe what they are and how you think they could boost sales?Sure, So a a virtual brand is brands that number one only exist on the online on the on the food delivery apps like like an uber eats.And they are.They appear as that new brand, and they're prepared in Ihop's kitchen and then delivered, You know, on behalf of that brand, so virtual brands, you can't have them just for the sake of having it.It's gotta have a real business need.And so Applebee's is primarily sorry.IHOP is primarily an AM brand, and our virtual brands are targeted toward, uh, night time, right?So tar targeted toward younger people, gamers, people who are ordering food at night.So we've got ballpark bites in partnership with MLB.We've got refuel in partnership with NASCAR.Um, we've got pardon my cheesesteak.And so, uh, those are those are brands that we think can add 2% or more to to IHOP's sales.They're already in 1000 restaurants and 500 of them have two or more of the brands Bacon, burgers, tacos, cheese steaks.It all sounds good.You too good to hear.Thank you so much for joining us.I appreciate that.Thank you.