iStock.com/jetcityimage
Should More Retailers Fuse Like Applebee’s and IHOP Dual-Branded Locations?
In the realm of American chain restaurants, a fascinating proposition is underway. It involves two household names: Applebee’s and IHOP. These restaurant retailers, both under the umbrella of Dine Brands Inc., are contemplating dual-branded locations where Applebee’s and IHOP come together, not just in physical space but in operational harmony.
The notion emerged from an earnings call conducted by Dine Brands Inc. last week. CEO John Peyton disclosed plans to explore dual-branded venues with shared back-of-house facilities and a seamlessly integrated front-of-house experience.
This novel idea has already seen the light of day in international territories. Peyton revealed that they’ve piloted the model in eight “prototypes” across the globe. One such location is the latest Applebee’s-IHOP establishment in Leon, Mexico, which commenced operations in January 2024.
Peyton emphasized the significance of Mexico as one of their primary international markets. He expressed optimism about the growth potential presented by the dual-branded venue in Leon during the earnings call and affirmed the company’s commitment to evaluating the success of this experimental concept, discussing the potential expansion to selected sites within the United States.
Peyton delved further into the logistics of these hybrid restaurants. He detailed plans for “discrete entrances” that would enable patrons to seamlessly transition between Applebee’s and IHOP sections. Peyton envisioned a scenario where during breakfast hours, when IHOP tends to see more foot traffic, guests could be accommodated in the Applebee’s section, and vice versa during dinner hours.
The financial prospects of these dual-branded venues appear promising, as Peyton highlighted during the earnings call. He noted that they are yielding double the revenue compared to standalone Applebee’s and IHOP locations.
Peyton underscored the synergistic nature of the two brands, emphasizing their complementarity. This sentiment aligns with the broader trend in the industry, where conglomerates like Focus Brands have successfully combined multiple chains under one roof. For instance, Auntie Anne’s, Jamba, and others have found shared spaces to thrive collectively.
The roots of this potential fusion trace back to 2019 when IHOP Corp. acquired Applebee’s International Inc. for approximately $1.9 billion in cash. This transaction marked a significant consolidation in the sit-down restaurant sector. Dine Brands Inc. emerged as the entity overseeing Applebee’s, IHOP, and, subsequently, other brands like Fuzzy’s Taco Shop.
Despite revenue fluctuations reported by Dine Brands Inc., with a decline from $909.4 million to $831.1 million between 2022 and 2023, the company has continued its expansion efforts. While 72 new Applebee’s and IHOP franchisees were developed in 2023, 75 restaurants were closed, indicative of the dynamic nature of the industry.
Exploring Dual-Branded Hotels: Maximizing Profits Through Combined Appeal
Hotels are among some of the first to take advantage of dual-branding and have become a trend in the hospitality industry. A dual-branded hotel is a unique breed that accommodates two distinct hotels under one roof. Gone are the days of pigeonholing one brand per property. Instead, this innovative approach allows hoteliers to cater to diverse demographics simultaneously.
The roots of dual-branded hotels can be traced back to the early 2000s when boutique hotels gained traction. These establishments showcased the profitability of catering to niche audiences. Hoteliers, eager to replicate this success, began exploring ways to tap into multiple markets within a single property. The beauty of this setup lies in its cost-saving potential. By sharing resources and overheads, these hotels streamline operations and bolster efficiency.
Pros of Duel-Branded Hotels:
- Cost Efficiency: Sharing facilities reduces construction costs, offering two for the price of one.
- Broadened Appeal: Two brands under one roof attract a wider spectrum of clientele.
- Strategic Land Use: Dual-branded hotels optimize land utilization, especially in prime locations with high real estate prices.
- Simplified Staffing: Shared personnel streamlines operations, managing fluctuating demand without increasing payroll.
Cons of Dual-Branded Hotels:
- Development Challenges: Retrofitting existing structures or making aesthetic changes can lead to significant expenses.
- Marketing Complexity: Crafting separate campaigns for distinct audiences strains resources and budgets.
- Design Dilemmas: Balancing brand individuality with cohesion poses architectural and operational challenges.
- Location Sensitivity: Success depends on selecting locales conducive to both brands’ prosperity, a task with inherent risk.
The potential integration of Applebee’s and IHOP into dual-branded locations presents a compelling narrative within the landscape of American dining. As Dine Brands Inc. navigates this territory, the future of these iconic chains hangs in the balance, poised for evolution in response to shifting consumer preferences and market dynamics.
Discussion Questions
How might the success of dual-branded restaurants, exemplified by the Applebee’s-IHOP fusion, reshape traditional notions of brand identity and customer loyalty within the retail industry?
What implications does this trend have for other conglomerates seeking to optimize their portfolio of brands?
In considering the financial and operational benefits of dual-branded establishments, such as shared resources and expanded customer reach, what criteria should executives use to evaluate the feasibility and potential pitfalls of merging disparate brands under one roof?
Poll
Loading …BrainTrust
Verlin Youd
SVP Americas, Ariadne
Patricia Vekich Waldron
Contributing Editor, RetailWire; Founder and CEO, Vision First
Putting a couple, or several, concepts under one roof makes for a more powerful ‘magnet’ in attracting customers. If, on the back end, there is some integration and resultant cost savings, all the better. The trick is to ensure the concepts are compatible from a brand, cultural and operational perspective. This isn’t going to work for every brand, especially those that are heavily themed or have a very specific position in the market, but it will work for some in the fast-casual dining space.
“Heavily themed” is an important point. How will these jointly branded restaurants be decorated?
If the brands have an attraction on their own, then together there may be strengths in co-locating, with obvious synergies in costs and investments. The natural fit for IHOP and Applebee’s is in the productivity of the location itself – IHOP is very popular in the morning, and then trails off quickly, while Applebee’s is strongest during dinner, but also does a strong lunch business depending on the location. However, this can’t be viewed as a strategy to save a weak brand; if the brands themselves are not appealing and on a downward trajectory, putting them together just delays the inevitable.
Dual Branding is a risky strategy. While there a many cost saving opportunities with dual branding, there is high risk. IHOP and Applebee’s works because one is a breakfast/lunch restaurant and the other is a lunch/dinner. Most other pairing for example super saver and luxury or jewelry and hardware will only dilute the higher quality/price.
IHOP/Applebess might make a certain amount of sense just from a resource utilization POV: one is primarily breakfast, the other lunch/dinner, so a chance to create a 24hour – or at least 18-20 hr – restaurant. Similar opportunities probably exist elsewhere, but I’m not particularly a fan: even in this example you’re combining brands with distinctly different look and feel ‘s….what will the combined one look like ?? Much like ‘ghost kitchens” a physical manifestation of the fact that many chains are really an assemblage of generic parts might be a just a little too honest.
Aha, “too honest”? Yes, one loses the “magic” of a brand.
I like this concept. These two brands have complementary strengths. Applebee’s has a casual dinner and bar business. IHOP is a breakfast destination with a stronger brand presence than Applebee’s.
Putting two old things together doesn’t make a new thing. I’m sure one side that has breakfast traffic and another that is more lunch/dinner makes sense for sharing some of the real estate and operational costs.. I’m not sure from a Branding pov there’s a lot of customer cross traffic about to take place.
Dual-branded restaurants like Applebee’s-IHOP fusion could redefine brand identity and customer loyalty in retail. This success suggests consumers embrace variety, challenging traditional notions. Loyalty may shift from single brands to diverse experiences, influencing how businesses approach marketing and customer relationships.
Embracing mixed-brand strategies can enhance market appeal, attract varied customer demographics, and provide a competitive edge by adapting to evolving consumer preferences and demands. Executives should assess the compatibility of brand images, target demographics, and menu offerings. They should evaluate operational synergies, cost-sharing benefits, and potential cannibalization risks.
Experimentation is the lifeblood of innovation and ongoing relevancy, so I applaud Dine’s commitment to this kind of innovation. In this specific case, IHOP and Applebees seem like a natural fit with complimentary schedules, differentiated menus, overlapping customer demographics, and similar location strategies. Additionally, maybe there are some lessons to be learned from a similar strategy at Yum Brands some years ago.
There was also the Sbarro / Arby’s combo back in the 1990s, or as we called it, “Sbarby’s”. But that was just cramming two workflows into the same kitchen, at the same dayparts, and drive-thru pizza just doesn’t work at lower volume and with limited oven space. This concept might work if the dining space is neutral ground; really just a micro food hall for the suburbs…
I like this concept, but would like to see it evolve into Food Halls. European and Scandinavian countries have very successful food halls where several restaurants share one building with common seating. Each restaurant has its own space and identify, with the operational savings coming from common areas/utilities/real estate. The goal should be to not make this feel like a mall food court, but rather a dining destination that caters to different party needs. Dunkin and Baskin have been sharing space for years, so the model already exists.
I really don’t know. How did the Taco Bell/KFC thing go? This strategy is like going into a food court, only one that is operated by the same firm for both brands. In this case, all I see is possible real estate savings….IHOP has no brand relationship that I can think of with Applebees. I mean, if there is one restaurant in town, fine, go out to breakfast then return for dinner or lunch?
I think this is more confusing than efficient. Or complementary. Or anything else that the marketers convince themselves of, in the conference room with all of the post it notes on the wall…
I have to admire the fact that these two brands found a way to collaborate in manner that is not necessarily dilutive to either. If these were apparel brands, I would say they have different “wearing moments”. These players have different “eating moments”. Fixed assets and expenses are shared efficiently. The details of avoiding brand dilution might be a little tricky. I was trying to think of a possible collaboration in apparel. How would an office wear retailer/brand collaborate with a casual wear retailer/brand, or an athletic wear retailer/brand? Then it occurred to me…that’s what we used to call a department store…!!!
Makes sense when two brands serve distinctively different offerings, yet similar customers.
This can go either of two ways. The space that brands occupy in the consumer mind is hard to understand as every brand is a mass of interconnections with each other and with need states. Do brands transfer weaknesses or do they transfer strengths? Or do consumers keep them compartmentalized? This is almost impossible to predict. Personally, when I saw Baskin-Robins and Dunkin Donuts under the same room, it confused me. Are those brands each weak and need each other? If you want to know how fragile a brand’s mental space is, ask Bud light. On the other hand, I wouldn’t make the same comments about Kellogg’s Raisin Bran with Sun Maid raisins and probably also more positive about Macy’s having TRU to bring back toys.
Applebee IHOP works because they have different emphasis in different times. IHOP is positioned for breakfast and Apple Bee is positioned for drinks and dinner. Lunch is kinda overlap for the two. It is an efficiency play for real estate, it really doesn’t built brand equity for either brands.
Fast and fast-casual restaurants have been trying to maximize multiple day-parts for years, bringing consumers Egg McMuffins and breakfast tacos. Dual branding can be more complicated for the many reasons cited, but if well done (both front and back of the house) it can be a boon for multi concept chains and consumers.
I’m all for novelty and experimentation. Bringing two concepts under one roof is a worthy endeavor as long as the shared back-of-house efficiencies don’t compromise the right dining atmosphere. Operational complexity is another consideration of this proposed model.