Applebee’s owner has revealed that the company will close 25 to 35 stores nationwide before the end of the year. Vance Yuwen Chen, the CFO of Dine Brands Global, owns Applebee’s and the breakfast chain IHOP. He indicated in February 2024 that Applebee’s stores would close.
However, Applebee’s president, Tony Moralejo, insists that these closures do not indicate a failing business. Amidst the 25 to 25 Applebee’s closures this year, around 25 IHOP outlets will open, according to Moralejo during an earnings call.
Chen and Moralejo cited them, and Moralejo cites a new reason for these closures. Also, Moralejo ensures that the closures will not be repeated. Whether IHOP is closing its stores? Let us dive into the article to learn further.
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About IHOP
The International House of Pancakes, most widely known as IHOP, has become popular throughout the world for its delicious sandwiches, burgers, and pancakes. IHOP began operations in 1958 in Burbank, California. Today, IHOP locations can be found all over the world. Their menu offers affordable breakfast essentials you can rely on every time you visit, regardless of where you are.
In 2007, IHOP paid $2.1 billion in cash to buy back shares from Applebee’s stockholders. The buyout was completed on November 29, 2007, and IHOP became DineEquity on June 2, 2008.
Dine Brands now owns IHOP Restaurants LLC. The business was formed after IHOPupurchasedlApplebeedependent franchisees control 99% of the stores.
Dine Brands revealed in March 2024 that it was looking into Applebee’ s-IHOP dual-branded restaurants over the next 12–24 months. It planned this after successfully launching prototypes in international markets.
Applebee’s plans for closure in 2024
As stated, Applebee’s and IHOP are fast-casual restaurants owned by Dine Brands Global. It is now set to close several of its locations in the United States in 2024. During Applebee’s fourth-quarter earnings call on February 29, President Tony Moralejo disclosed the actual figure.
During the call, Moralejo stated, “We’re projecting 25 to 35 net less domestic Applebee’s restaurants.” He also mentioned that up to 25 new IHOP locations will open this year.
“With our new development strategy in place, we are confident in our capacity to continue to open up new restaurants. Also, we will expand the footprint of our brands over time,” he added.
In 2017, Applebee’s closed over 100 restaurants nationwide. During the results call, Dine Brands CFO Vance Yuwen Chang stated that the restaurant company will close 33 stores in 2023. In contrast, IHOP set up 46 new restaurants in the United States last year. In total, 17 of them opened during the company’s fourth quarter.
“I will stress that these closures are not indicative of struggling franchisees. They’re the signs of troubled trade areas,” Moralejo explained. “And I can guarantee that our leadership team is using every lever to reduce the adverse effects of closings.”
According to Moralejo, “Applebee’s is an established brand. It is normal to have closures with shifting trade areas and franchisee contract expiration.”
The goal of Applebee’s
Everyone has seen Taco Bell and KFC pairing or Auntie Anne’s and Cinnabon. There may be another restaurant with two brands in the US dining market.
According to an earnings call on February 28, Dine Brands Global is considering combining Applebee’s with IHOP.
Dine Brands hopes Applebee’s will resume growth, the business stated on its earnings call. Due to the high cost of creating an Applebee, Dine Brands is “assembling a prototype” for an alternative.
According to the company’s earnings call, revenue from joint restaurants might be double that of independent restaurants. This is because the menus of the two restaurants include items for every time of day, including boneless wings at night and pancakes for breakfast.
Coming back, the issue for any restaurant company that is thought to be struggling and closing outlets is that there is usually some truth mixed in with the lies. Rumors circulated on social media claiming Applebee’s and IHOP were closing specific locations or going out of business altogether.
IHop is quite famous nationwide, with 1,697 locations as of December 13, 2023. Applebee’s closing of more than 100 locations in 2017 was the last major shop closure for the chain. During a second-quarter earnings call, Richard Dahl, interim CEO of Dine, stated that the shutdown was “long overdue.”
According to Moralejo, Applebee’s 2024 closure rates will be 1-2%. It is usual for a brand to grow with age. “Our goal is to resume net unit growth in the years ahead by implementing a new value-engineered prototype. Also, we maintain our focus on increasing.
top-line sales while improving the margins of our franchisees.”
Applebee’s still operates over 1600 locations worldwide, whereas IHOP has over 1700 sites worldwide.
Thus, Dine Brands Global has been exploring combining Applebee’s with IHOP to reshape its strategy. The firm began testing its hybrid Applebee’s and IHOP concepts earlier this year. It has now launched eight sites, including one in Mexico.
IHOP and Applebee’s share the same structure and back-of-house areas, such as the kitchen. This is for this hybrid to function successfully. Customers can sit on either the IHOP or Applebee’s side. However, there will be discrete doors inside that will allow them to move between the two restaurants.
John Peyton, CEO of Dine Brands Global, feels that this hybrid approach reflects the future of restaurants. Peyton told,
“During breakfast, when there will be more IHOP customers, they can be seated in the Applebee’s area, and vice versa at dinner. It’s an excellent chance since the two brands are complementary.”
According to Peyton, the combined businesses in the eight locations make twice as much money as the individual restaurants. Dine Brand Global will introduce additional hybrid models around the country by 2025.
IHOP-Applebee’s Combo expanding Internationally
There is already an IHOP-Applebee combo for people who want a pancake stack with a dollar on the side. Dine Brands CEO John Peyton says the firm recently opened its eighth IHOP-Applebee’s in Leon, Mexico.
At existing international sites, the two brands share a back-of-house and a combined front-of-house for diners. Peyton stated that with the international prototypes, the business is “gaining insight and expertise as we consider introducing this concept in the US.”
Peyton stated on its earnings call that Mexico is one of the brand’s largest international markets. In an email, Peyton said, “We will keep an eye on the success of this test concept. Also, we will explore ideas for further expansion in the US in specific locations. This will be done if and when it makes sense to do so.”
Other companies are also considering the concept of joint restaurants. Focus Brands owns several of the combination fast food outlets seen by customers.
In January 2023, Focus Brands stated that these combined concepts are the future of fast-food restaurants. It said it had 175 of these restaurants in its portfolio, with another 65 on the way.
Focus Brands also saw the possibility for profit. Combination sites enabled restaurants such as Auntie Anne’s and Cinnabon to expand outside malls and into busier streetside locations.
Conclusion
To sum up, the casual restaurant brand closed 46 sites last year. Tony Moralejo announced that an additional 35 locations would be closed. He described the decision as “extremely difficult” and “the final option.” There will still be around 1,500 Applebee’s in America, showing that the business is growing. Still, to reduce expenses, underperforming stores must be closed.
Applebee’s stores in Antioch, California, and Waco, Texas, shuttered earlier this year, while the one in Hudson, New York, was planned for closure in May 2024. Employees there will be offered other positions within the company.
However, Dine Brands plans to test new things to improve sales. One of the goals is to start creating combo Applebee’s-IHOP outlets next year, given that they also own IHOP. There needs to be information on which Applebee’s will close in the coming months.
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