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Tepid results for IHOP, Applebee's

Parent company says stability has improved for the chain restaurants, whose sales have dipped slightly.

July 30, 2010|By Bill Kisliuk, bill.kisliuk@latimes.com

The Glendale-based operator of 3,450 Applebee's and IHOP restaurants offered a lukewarm financial report Thursday.

Sales dipped slightly in the second quarter for DineEquity Inc., though the results showed improvement over the previous three quarters. Total revenue was $339.9 million, down nearly $10 million from the same quarter last year.

Executives said the company showed improved stability while aggressively paying down debt from the 2007 purchase of the Applebee's brand.

"Same-restaurant sales results at both brands were encouraging, with Applebee's experiencing a third sequential quarter of improvement as IHOP's performance continued to be strong relative to the family dining category," DineEquity Chairman and Chief Executive Julia Stewart said in a statement.

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Same-restaurant sales at Applebee's declined by 1.6 % compared with the same period last year, while IHOP declined by 1 %. The company reported that the average guest check was larger than it was last year, but that fewer guests came through the doors.

Harry Balzer, chief industry analyst for the NPD Group, which tracks the food industry, said the market remains tough for restaurants.

"It is hard to say that a negative number is a good number, but in terms of the restaurant industry and you'd be hard pressed to see anything worse than last year," Balzer said.

Increased competition from supermarkets that offer prepared foods, together with the frozen food industry, are putting a crimp in the market, though the weakness stems mostly from a lack of discretionary income among consumers, he added.

The last two years of declines in the restaurant industry buck a trend among American consumers that goes back 50 years, Balzer said.

Last week, DineEquity announced the sale of 63 Applebee's restaurants in Wisconsin for $32 million. The transaction will result in $105 million in benefits, in part because it no longer carries lease obligations on those properties, according to the company.

Stewart said the company will also engage in a rebranding and other efforts to boost the bottom line. The company plans to open between 25 and 30 new restaurants this year alone.

"Our plan includes marketing, menu, operational and remodel initiatives that will differentiate the Applebee's and IHOP brands and position DineEquity for a solid financial performance in the second half of 2010," she said.

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