GLENDALE, CALIF. — The parent of Applebee’s Neighborhood Grill & Bar and IHOP may hop into the fast-casual game. DineEquity, Inc. said it is looking to invest in a third concept that won’t compete with its other brands.
“So, it wouldn’t be in family dining, and it wouldn’t be on casual dining,” said Julia Stewart, chairman and chief executive officer, during an Oct. 28 call with financial analysts to discuss third-quarter earnings. “And quite candidly, it’s really all about our franchisees being able to develop it. So, it has to have a whole bunch of white space or it doesn’t make sense. So that’s why something small and something unique is what we would probably look for. But it is something that our franchisees would want to develop, and would welcome, and that it had a great four-wall economic kind of look-out.”
With no particular brands in mind, the company is scanning the marketplace for a small, emerging concept with potential for domestic and international expansion. In a similar move, casual-dining player Buffalo Wild Wings recently made strategic investments in two small fast-casual chains, PizzaRev and Rusty Taco.
“I want to emphasize that while we are evaluating this growth option, we do not have a timetable, we are not in a rush, and a transaction is not imminent,” Ms. Stewart said. “We don’t have anything today on our radar.”
Though DineEquity is pursuing growth opportunities outside of casual dining, the company has observed a rebound in the category. Trends improved for Applebee’s and IHOP, which during the quarter posted increases of 1.7% and 2.4%, respectively, in domestic system-wide same-restaurant sales.
Net income for the period ended Sept. 30 increased 0.8% to $18,887,000, equal to 99c per share on the common stock, which compared with $18,730,000, or 98c per share, in the prior-year quarter. Revenues totaled $162,853,000, up nearly 1% from $161,283,000.
At Applebee’s, menu innovation, including all-you-can-eat crosscut ribs, helped drive sales across day parts. A pipeline of new items is expected to roll out next year.
“In casual dining, the most critical piece of success is differentiating yourself and truly being unique in the category,” Ms. Stewart said. “And that, frankly, is what we have spent all of our time and effort on. And hopefully, you will really see the effects of that in 2015 in every aspect of the business, trying to really differentiate ourselves so that we are unique, and people say, gee, it’s just different at Applebee’s than everyone else.”
Plans include future enhancements to the bar, a “huge focus” for Applebee’s.“I will be in a much better position to talk about that next year,” Ms. Stewart said. “But we have a great deal of testing going on right now. And when I say every aspect, I really mean every aspect as you think about the bar, whether it is the drink offerings, the food offerings, the bartenders, (and) beyond.”