Applebee's and IHOP owner Dine brands thinks its deals could turn away fast-food customers who have grown frustrated with menu prices.
As consumers scale back their restaurant spending, Applebee's and IHOP are battling a larger group of rivals than usual for a smaller group of customers. John Peyton, CEO of Dine Brands, said full-service restaurants, fast-food chains and even at-home dining are all competing for diners' dollars.
To rise above the competition, Applebee's has focused on value with a series of promotions, including the return of Dollaritas, leaving Peyton confident it can beat the fast-food chains vying for its customers.
“The Whole Lotta Burger for $9.99 – if you can get our burger for $10, which is great quality, plentiful and can be eaten in our restaurant, why would you, in our experience, want a $10 burger? 10 out of a paper bag in your car?” he told CNBC.
According to Peyton, low-income consumers visited less often in the first quarter and spent more carefully when dining out. Consumers with incomes under $50,000 represent about 40% to 50% of Dine's customers, he said.
Dine Brands reported first-quarter earnings that fell short of Wall Street expectations, and same-store sales at both Applebee's and IHOP fell more than expected. Still, Dine reiterated his full-year outlook and said sales have improved sequentially. The company's shares rose less than 1% in afternoon trading on Wednesday.
Applebee's isn't the only casual dining chain focusing on… McDonald's and the rest of the fast food category. Chili's, owned by Brinker Internationalrecently launched an ad campaign calling out the Big Mac and other fast food burgers for their prices.
And McDonald's is certainly feeling the heat. CEO Chris Kempczinski told analysts on the company's last earnings call that “everyone has a value message,” which is why the chain is trying to create a national value menu.
In addition to pursuing deals, Applebee's could also gain a competitive edge from a trio of recent pop culture moments: a pivotal cameo in the tennis drama film “Challengers,” an Applebee's-motivated meltdown on “Survivor” and a shoutout from the football world. legend Peyton Manning during Netflix's roasting of his former rival Tom Brady.
Ever since Beyonce mentioned Red Lobster on her hit song “Formation,” a casual dining chain has felt so relevant in pop culture.
“It's a priority for a lot of people, and that's because they grew up with Applebee's,” Peyton says.