Applebee's says it figured out its biggest mistake — here's the major change it's making to turn business around
Applebee's has a problem — it is essentially the same as thousands of other casual dining restaurant across the US. Now, it's working to change that.
"This brand is in the midst of a significant transformation, as is, quite frankly, the category," says CMO Darin Dugan "Top of mind for us was to come up with a compelling and differentiated campaign that will break us out of the sea of sameness."
Things haven't been looking good for the chain recently, with sales decreasing 3.7% in the most recent quarter. However, after years of slumping sales and unsuccessful turn-around initiatives, the chain says it has a solution — this time, hopefully, for real.
On Monday, Applebee's announced what the brand is calling a "comprehensive business transformation," which promises to be the most significant in company history.
The brand is installing wood fire grills in all 2,000-plus locations across the US — a $40 million investment by the chain's franchisees. The grills will completely change much of Applebee's menu's meal preparation, impacting 40% of items on the menu.
It's a major change that Applebee's hopes will allow the chain to gain culinary credibility and stand out from the vast array of casual dining restaurants across the US, which have struggled to keep up in an era dominated by fresh fast casual chains.
"You're going to see it and hear it," Julia Stewart, the chairman and CEO of Applebee's parent company DineEquity, Inc., told Business Insider. "You're going to literally smell it when you're in the parking lot, and then you're going to walk in and see it on the menu, and then you're going to have a food server talk about it in a very excited way."
Applebee's needs to get diners excited given the recent sales slump. The chain has attempted various adjustments and initiatives to turn business around in the last few years, with changes such as location-specific menu items and rolling out tables in restaurants. However, the changes haven't been enough.
The crux of the problem is that Applebee's is suffering from a problem that has plagued many modern casual chains: it isn't exciting, with nothing to distinguish itself from the competition.
The chain knows this.
"I think it's wonderful that we were the first people to do 'two for $20,' we were the first people to do the skinny margarita, we were the first to do under 550 calories and fabulous," says Stewart. "All those are wonderful assets of the brand, but they're too easy to steal."
With the brand revamp, Applebee's wants to stand out in a way that the competition can't copy.
Beyond the grills, the chain is adding new items like hand-cut wood-fired steaks to the menu, training employees as meat-cutters, and remodeling locations across the US. It is also launching a $120 million marketing campaign, the largest in the company's history, with a new creative agency.
These changes require an investment, but Stewart believes that these "bigger and bolder" changes are necessary if Applebee's truly wants to stage a comeback. Executives say they are confident that these changes will serve as a major reset for the brand.
According to Applebee's executives, responses to market tests, growing employee pride, and franchisees' eagerness to invest in the changes have served as promising indicators. However, with other innovations' failure to boost sales in recent years, it remains to be seen if the rebranding will be enough to set Applebee's apart from the competition — a lofty goal in the modern casual dining business.
"I think the most important thing we can do at Applebee's is to continue to differentiate ourselves and remind consumers what we can do better and differently than anybody else," says Stewart. "For the time being today, it's the fact that we're the only chain in America doing hand-cut and wood-fired."
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