DineEquity Inc., the Glendale-based owner of IHOP Restaurants and Applebee’s Neighborhood Grill & Bar, is making a heavy push toward franchising.
More than 95% of the company’s thousands of restaurants are now owned by entrepreneurs, DineEquity said Tuesday when it announced its first quarter earnings.
The franchise model helps keep the company’s balance sheet from wild swings, leading to a 5.5% boost in profit to $31.3 million, or $1.64 a share, from $29.7 million, or $1.53 a share during the same quarter a year earlier.
Despite mild winter weather and DineEquity’s ongoing remodeling efforts at its restaurants, revenue slipped 18% to $245.6 million from $300.2 million, due in part to the refranchising effort. Sit-down casual restaurants have been among the worst performers of the recession and its aftermath as they face competition from cheaper and more hip fast-casual competitors.
Same-store sales at Applebee’s locations open more than a year were up 1.2% compared with last year as fewer guests paid more for their meals.
“We've recognized the need for more traffic-driving innovation across products, service platforms and promotions at Applebee's,” where more than 90% of the menu has been upgraded or replaced over last four years, said Chief Executive Julia A. Stewart in a conference call with analysts.
The same mix of slumping traffic and higher checks, however, caused revenue at IHOP to slide 0.5%. The chain is focusing on improving guest service by boosting server speed and attentiveness while also offering more value and health-oriented menu items, launching new advertising efforts and employing social media, Stewart said.
Another chain in the category, P.F. Chang’s, said Tuesday that it was going private after its profit for the first quarter tumbled 41%.