Jun 21, 2019 | Report Announcements

Applebee’s benefits from a return to its Eatin’ Good In the Neighborhood grill & bar positioning with an emphasis on abundant value (plate coverage) and buzzworthy beverage & culinary innovation (leveraging mainstream American recipes/flavors) that is designed to get diners off the couch and over to America’s Kitchen Table. Applebee’s everyday value positioning includes its signature 2 for $20 – $22/$25+ platform and monthly $1 – $2 craft cocktail offers (mirroring low priced QSR coffee/espresso offers) which work well for the brand’s core middle-income customer base. Resultantly, the chain enjoys an all-time high value for the money rating (surpassing its primary competitors) which is consistent with a check that is substantially lower than the segment average. Also, promotions like the Dollarita and all-you-can-eat riblets attracts a younger crowd of Millennials which come in groups and skew toward female, Hispanic and African American. TV ads are well done, featuring compelling food photography set to famous pop songs (creating emotional connections) and punctuated with its “Eating good in the neighborhood” tagline. Operations benefit from a reduction in store performance variability and back of the house simplifications, helping to drive all-time high guest satisfaction scores. Recent comp sale trends are outperforming and benefit from corporate contributions to the ad fund to go with the 2H17 initiative to redefine the Applebee’s brand identity & culture. Results are attributed to: nurturing a winning leadership team that is very well seasoned & collaborative; re-establishing franchisee trust; increased investments in research & consumer insight; enhanced guest & team member engagement through consumer-facing technology & CRM; guest satisfaction improvements; a focus on traffic-generating menu innovation & abundant value; and accelerated growth in its off-premise businesses (To-go/car-side & delivery is ramping-up as the system also develops a new family catering channel). However, despite +5% comp growth during 2018, the system’s AUV remains significantly below the segment average with an EBITDAR margin that is finally rebounding from a 2017 system low. In conclusion, Applebee’s return to its roots as a strong value player which is now quite adept at keeping things interesting and relevant is an essential first step towards the brand’s important task of catching-up with the segment average AUV which will be required to fund remodels and development necessary to maintain its claim as king of the casual mountain.

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