In the three months ended June 30, sales at the two chains, both owned by Dine Brands, grew about 6% to 8% among households earning over $75,000 a year, according to John Peyton, CEO by Dine (DIN).
The bump “suggests to us that diners, who often dine at more expensive restaurants, find Applebee’s and IHOP because of their well-known value position,” Peyton said during an analyst call Tuesday discussing the company’s quarterly results. The phenomenon is “why we do so well in tough times like these,” he said, adding that the brands performed relatively well during the 2008 financial crisis.
But there’s a downside to getting sales to higher-income customers.
Both brands saw theirs For households with an annual income of less than $50,000, sales drop by a few percentage points. “We assume they left us for lower-cost options,” Peyton said. Those losses didn’t weigh on the company’s quarterly results, however. Sales at Applebee locations that have been open for at least a year increased 1.8% for the quarter, and IHOP restaurants that have been open for at least a year saw a 3.6% jump in sales during that period.
Both Applebee’s and IHOP increased their menu prices this year. Instead of focusing on absolute prices, they tend to have different values.
“Both of our brands … position themselves as value-driven at all times,” said Peyton. That means “delicious food [and] generous portions in a wonderful setting at an affordable and affordable price,” he added, noting “at times like these, when it’s difficult economically for our guests, our brands have a special know-how” to add value create.
Applebee’s tries to avoid direct discounts. Instead, it offers deals on meal additions, like adding a dozen shrimp for a dollar when you order a steak. Another tactic is handing out freebies. As part of a Top Gun promotion earlier this year, Applebee’s customers who spent at least $25 at the restaurant received free movie tickets.
At IHOP, customers can find discounted items at the brand’s IHOPPY Hour, which begins at 3:00 p.m. at participating restaurants when appetizers, snacks and sides are sold at lower prices than usual. There are also time-limited promotions where children can eat for free, for example.