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Business

Applebee’s facing sixth straight negative quarter in sales

By
Lisa Fickenscher
Published Jan. 24, 2017, 10:18 p.m. ET

Diners have had their fill of Applebee’s Grill & Bar.

A menu flop has given the casual dining chain and its 2,000 eateries indigestion, as wood-fired steaks that were added last May scared wallet-conscious customers and forced Applebee’s to offer big discounts instead, restaurant gurus say.

Next month, the family dining chain is expected to turn in the worst sales results of the 25 largest restaurant chains in the US, including McDonald’s, Subway, Chili’s and Olive Garden, according to Instinet analyst Mark Kalinowski.

He cut his rating on shares of Applebee’s owner DineEquity, which also owns IHOP, to neutral on Tuesday.

Kalinowski expects Applebee’s same-store sales will be down 5.5 percent for the fourth quarter — its sixth straight negative quarter. DineEquity’s stock closed down 4.1 percent, at $69.31 on Tuesday.

Sister chain IHOP, with its all-you-can-eat pancakes promotion, has reported mostly flat quarterly sales for the past several years.

In May, DineEquity’s top brass mandated that its franchisees add wood-fired grills to their kitchens to support new menu items, including hand-cut steaks, bone-in pork chops, grilled salmon and chicken.

“It was a huge expense and it has not been the paradigm shift it was expected to be,” said Zane Tankel, who runs 39 Applebee’s in the New York metro area, adding, “We weren’t quick enough to pivot when we began to get data that hand-cut, wood-fired wasn’t doing what it should be doing.”

Instead, Applebee’s has been running promotions offering buy-one-meal, get-one-meal-free for $12.49 and chicken-and-shrimp dishes for $9.99.

“That’s fast-food pricing,” Tankel said.