Applebee’s Executive Summary
Applebee’s is the largest player in the casual dining segment with an emphasis around comfort food, adequate plate coverage and moderate prices well suited to its core Middle America, blue collar demo. Its “Eatin’ Good in the Neighborhood” Grill + Bar brand positioning is based upon: a comfortable, all-American atmosphere with great tasting food & a prominent bar area which provides energy for diners; foods that you can pronounce and which are broadly appealing & mainstream; abundant value; decorating cues tied to individual neighborhoods; and appeal as a place to connect with family & friends. Applebee’s leads the category in: affordability; menu variety; convenience; to-go awareness; delivery awareness; and overall brand awareness according to its internal research. The brand also outperforms the category average on: staff makes me feel valued; family friendly; great-tasting food brand; affinity; and visit intent. Attributes are at an all-time high. 1Q22 system comps increased +14.3% (also +14.3% on a 3-year stacked basis) and this followed a full-year 2021 system comp increase of +38.2% (+7.2% over 2019) driven by the retention of newfound off-premise sales developed during covid even as dine-in sales rebounded. While a full return to dine-in pressures off-premise sales, its long-term off-premise mix is expected to settle in the low to mid-20% range, double its 13% pre-lockdown mix. Going forward sales drivers include: a return of older diners; a return to 2019 staffing levels; the addition of drive-thru pick-up windows at 50% of the restaurants; growth in late-night; the addition of ghost kitchens; the development of smaller restaurant prototypes; and off-premise enhancing technology like I-have-arrived app (Flybuy). All-the-same, Applebee’s need to offer value is currently more important than ever given the disproportionate impact of current inflationary conditions on its core, lower-income demo. This represents a challenge as the chain’s unit-level EBITDAR margin, while recovering from 2020 lows, is still well below its 2012 high. In conclusion, while Applebee’s solid turnaround is exemplified by its recent sales outperformance, it remains to be seen how well the brand’s core Middle American demo will fare given the current economic stress that is sure to prompt at least some QSR trade-down.