Dine Brands ((DIN)) has held its Q3 earnings call. Read on for the main highlights of the call.
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Dine Brands Earnings Call: Cautious Optimism Amid Strategic Progress
The recent earnings call for Dine Brands revealed a sentiment of cautious optimism, underscored by positive developments and ongoing challenges. While Applebee’s sales growth and a successful dual-brand strategy were highlighted as significant achievements, IHOP’s negative comparable sales and increased commodity costs presented hurdles. The overall sentiment leans towards cautious optimism, with notable progress in strategic initiatives.
Applebee’s Positive Sales Growth
Applebee’s reported a 3.1% increase in comparable sales, marking the second consecutive quarter of positive sales and traffic growth. This performance underscores the brand’s resilience and ability to attract customers, contributing positively to Dine Brands’ overall financial health.
Successful Launch of New Menu Items
The introduction of new menu items, such as the Chicken Parmesan Fettuccine and Ultimate Trio appetizer, played a crucial role in driving transaction and sales growth at Applebee’s. These innovations have resonated well with customers, showcasing the brand’s commitment to menu innovation.
IHOP Positive Traffic Trends
IHOP achieved positive traffic comps for the first time in many years, outperforming industry benchmarks every month in 2025. This positive trend indicates a growing customer base and improved brand perception, despite the challenges in comparable sales.
Dual Brand Strategy Success
The dual-brand strategy, combining IHOP and Applebee’s, has proven successful, with sales performance 1.5x to 2.5x higher post-conversion. Franchisee profitability has significantly increased, highlighting the strategy’s effectiveness in enhancing financial performance.
Increase in Off-Premise Sales
Applebee’s off-premise sales saw a 9% increase in Q3, driven by pairing limited-time offers with digital promotions. This growth reflects changing consumer preferences and the brand’s adaptability to meet these demands.
Strong Franchisee Alignment
Franchisees remain aligned with the company’s strategy, demonstrating resilient franchisee health and positive engagement in international markets. This alignment is crucial for sustaining growth and implementing strategic initiatives effectively.
IHOP Negative Comparable Sales
Despite positive traffic trends, IHOP reported a 1.5% decrease in comparable sales. This decline highlights ongoing challenges that the brand needs to address to improve its financial performance.
Decrease in Adjusted EBITDA and Free Cash Flow
Adjusted EBITDA decreased to $49 million from $61.9 million year-over-year, and adjusted free cash flow decreased to $68.2 million from $77.8 million. These declines indicate financial pressures that the company must navigate carefully.
Increase in Commodity Costs
IHOP faced a 5.7% increase in commodity costs, with continued challenges due to elevated egg, pork, and coffee prices. Managing these costs will be critical for maintaining profitability.
Company-Owned Store Losses
Company-owned stores faced significant losses, impacted by temporary closures for remodels and dual brand conversions. These challenges are expected to be temporary as the company completes its strategic initiatives.
G&A Expenses Increase
General and administrative expenses increased to $50.2 million from $45.4 million, driven by compensation-related and travel expenses. This increase reflects the company’s investment in its workforce and operational capabilities.
Forward-Looking Guidance
Dine Brands provided guidance reflecting consistent momentum in sales and traffic from the previous quarter, driven by menu innovation and targeted marketing campaigns. The dual-brand strategy is highlighted as a key growth driver, with expectations of approximately 30 dual-branded restaurants being opened or under construction by year-end. The company maintains its full-year financial outlook, anticipating EBITDA to be on the lower end due to investments in company restaurants.
In conclusion, Dine Brands’ earnings call conveyed a sentiment of cautious optimism, with significant progress in strategic initiatives and ongoing challenges. The company’s focus on menu innovation, dual-brand strategy, and franchisee alignment positions it well for future growth, despite the financial pressures and market challenges it faces.