Wealthier people eat more at Applebee’s and IHOP

In the three months ended June 30, sales at the two chains, both owned by Dine Brands, grew about 6% to 8% among households making more than $75,000 a year, according to Eat (FROM) CEO John Peyton.

The bump “suggests to us that patrons who often dine at higher-end restaurants are finding Applebee’s and IHOP because of their well-known value position,” Peyton said during an analyst call Tuesday discussing the company’s quarterly results. The phenomenon is “why we perform well in tough times like this,” he said, adding that brands performed relatively well during the 2008 financial crisis.

But there is a downside to getting sales among customers with higher incomes.

Both brands did their thing sales fall a few percentage points among households earning less than $50,000 a year. “We assume they̵[ads1]7;ve left us for cheaper options,” Peyton said. However, these losses did not reduce the company’s quarterly results. Sales at Applebee’s locations have increased at least one year since opening 1.8% in the quarter, and IHOP restaurants that have been open for at least a year saw sales increase by 3.6% in that period.

Applebee’s and IHOP have both raised their menu prices this year. Instead of focusing on absolute prices, they lean into other perceptions of value.

At all times, “both of our brands … position themselves as value-oriented,” Peyton said. It means ‚Äúdelicious food [and] generous portions in a wonderful environment at an affordable and accessible price,” he added, noting “in times like these, when the economy is tough for our guests, our brands have special expertise” in adding more value.

Applebee’s tries to avoid direct discounts. Instead, it offers meal add-on deals, like adding a dozen shrimp for a dollar when you order a steak. Another tactic is to give out freebies. As part of a Top Gun promotion earlier this year, Applebee’s customers who spent at least $25 at the restaurant received free movie tickets.

At IHOP, customers can find discounted items at the brand’s IHOPPY Hour, which starts at 3 p.m. at participating restaurants, when appetizers, snacks and side dishes are sold at lower prices than usual. There are also time-limited campaigns that, for example, allow children to eat for free.

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