DineEquity Inc., the parent company of IHOP and Applebee’s, reported a 5.5% increase in profits during the first quarter of 2012. They also announced a purchase agreement for the sale of 39 Applebee’s locations that are currently company operated. The units are being sold to the Potomac Family Dining Group LLC of Virginia.
Set to close in the third quarter, this deal is expected to net DineEquity about $25 million, reducing the firm’s sale-leaseback obligations to the tune of $40 million. This is the second time that Potomac Family Dining has purchased restaurants. Earlier purchases were made in the Washington, DC area.
DineEquity is moving towards refranchising and this sale will place about 96% of Applebee’s restaurants in franchise agreements. This last transaction is part of an overall strategy and has helped boost numbers, but is only a portion of the total picture.
Julia Stewart, Chief Executive of DineEquity, states that the company is focused on innovative efforts that will help to differentiate each brand. Applebee’s has replaced and upgraded almost everything on the menu in the last few years. Particularly successful have been New Orleans-style dishes and the 2-for-$20 menu. Additionally, 36% of the units have been renovated and more are due to be completed by the end of the year.
IHOP restaurants have not received as much attention, but DineEquity plans to continue work on the menu, focusing upon promoting the value message that’s so attractive to customers. One such innovation was the recently revealed “7 for $7” menu selections. These offer 7 meal options for only $7 each day.
IHOP will be launching a new marketing campaign in the second quarter. The brand is moving towards healthier selections as well as low-calorie items so as to draw in a different demographic. While DineEquity is still searching for the perfect value message for IHOP, franchise support remains strong.
Tags: applebee's, DineEquity Inc., IHOP, refranchise, value
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