Recoveries at Dine Brands are limited by capacity constraints and consumer prudence.
GLENDALE, CA Dine Brands Global, Inc., the company that owns Applebee’s and IHOP, saw little rebound during the second quarter due to capacity constraints imposed by the government and consumer caution.
Applebee’s president John C. Cywinski stated, “Most geographies imposed a 25% to 50% capacity restriction,” during a conference call with financial analysts on July 29. “The understandably cautious nature of the American consumer in this environment is another factor impeding our recovery.”
In contrast to its net income of $21.5 million, or $1.71 per share, during the same period last year, Dine Brands had a loss of $134,779 in the second quarter that concluded on June 30. Sales for the quarter dropped from $33.8 million to $16.7 million from the previous year.
In comparison to the previous quarter, same-restaurant sales at Applebee’s and IHOP increased by 59 and 47 percentage points, respectively, but decreased by 49% and 59% when compared to the same period last year.
“Both brands improved considerably with Applebee’s down 18% and IHOP down 34% for the last week of the quarter, but we started the quarter at a very low position with weekly comps down 77% at Applebee’s and down 82% at IHOP for the week ended April 5,” the statement reads stated Stephen P. Joyce, CEO of Dine Brands Global, Inc.
IHOP experienced difficulties during the breakfast hour but profited from increased traffic throughout lunch and dinner.
IHOP CEO Jay D. Johns stated that “there were essentially less people stopping for breakfast on their way to work, primarily due to statewide mandates to remain at home and rising unemployment.” “In addition, there has been some pressure on the breakfast category overall in comparison to other meal periods.”
At both locations, the bulk of events took place off-premises, making up 54% of total sales at IHOP and 61% of total sales at Applebee’s.
Reductions in staple menu items at Applebee’s helped to partially offset costs related to the company’s greater reliance on off-premises operations as well as additional sanitation and safety measures.
Mr. Cywinski remarked, “We have some incremental costs associated with PPE, making sure that guests and associates are safe.” “However, those have been counteracted, and it is likely that a more closely clustered menu with an emphasis on the things that are truly moving has helped.”
The management also mentioned that the coronavirus (COVID-19) pandemic is predicted to cause up to 75% of independent restaurants to permanently close.
Mr. Joyce stated, “There will undoubtedly be a large number of buildings available for conversion.” And you have a number of brands that were having trouble before the outbreak. Many restaurants are closing their doors. Obviously, we’re giving everything a close examination.
According to management, both brands may profit from the high casualty rate.
According to Mr. Cywinski, “casual dining is the one category that is absolutely disproportionately reliant upon independent restaurants.” Since independent restaurants make up more than 90% of all casual dining establishments, well-positioned, robust brands with a strong sense of vibrancy stand to gain a great deal. It would be the only one where the opportunities are particularly noteworthy.
As some independents permanently close their doors and IHOP grows through both traditional and atypical expansion, Mr. Johns continued, “this scenario really creates an opportunity for IHOP to enhance its market share.”