Applebee's owner Dine Brands wants to steal fast-food customers with its deals

• Applebee’s and IHOP have been losing low-income customers, but parent company Dine Brands is hoping its deals can help the chains compete with fast food.
• Dine reported disappointing first-quarter earnings and revenue, yet reiterated its full-year forecast.
• Dine Brands CEO John Peyton told CNBC that full-service restaurants, fast-food chains and even eating at home are competing for diners’ dollars.

Applebee’s owner Dine Brands wants to steal fast-food customers with its deals

Applebee’s and IHOP owner Dine Brands thinks its deals can lure away fast-food customers who have grown frustrated with menu prices.

As consumers pull back their restaurant spending, Applebee’s and IHOP are fighting against a larger group of rivals than usual for a smaller pool of customers. Dine Brands CEO John Peyton said full-service restaurants, fast-food chains and even eating at home are all competing for diners’ dollars.

To rise above the competition, Applebee’s has been leaning into value with a slate of promotions that includes the return of Dollaritas, which makes Peyton confident that it can beat out the fast-food chains vying for its customers.

“The Whole Lotta Burger for $9.99 — if you can have our burger for $10, which is great quality, abundant and eat in our restaurant, in our experience, why would you eat a $10 burger out of a paper bag in your car?” he told CNBC.

Low-income consumers visited less frequently and spent more carefully when they did eat out in the first quarter, according to Peyton. Consumers with incomes under $50,000 account for about 40% to 50% of Dine’s customers, he said.

Dine Brands reported first-quarter earnings that fell short of Wall Street’s estimates, and both Applebee’s and IHOP’s same-store sales shrank more than expected. Still, Dine reiterated its full-year outlook and said sales have improved sequentially. Shares of the company closed roughly flat.

But it’s too soon to tell if Dine will succeed in winning over diners — and investors. The company will need to improve its same-store sales growth significantly to meet the full-year outlook it reiterated this year, Raymond James analyst Brian Vaccaro wrote in a research note on Wednesday.

Applebee’s isn’t the only casual dining chain aiming at McDonald’s and the rest of the fast-food category. Chili’s, which is owned by Brinker International, recently rolled out an ad campaign that calls out the Big Mac and other fast-food burgers for their prices.

And McDonald’s is certainly feeling the heat. CEO Chris Kempczinski told analysts on the company’s latest earnings call that “everybody’s out there with a value message,” which is why the chain is looking to create a nationwide value menu.

Besides leaning into deals, Applebee’s might also get an edge on the competition from a triad of recent pop-culture moments: a pivotal cameo in the tennis drama film “Challengers,” an Applebee’s-motivated meltdown on “Survivor” and a shoutout from football legend Peyton Manning during Netflix’s roast of his former rival Tom Brady.

Not since Beyonce name-dropped Red Lobster on her hit song “Formation” has a casual-dining chain felt so relevant in pop culture.

“It’s top of mind for so many people, and it’s because they’ve grown up with Applebee’s,” Peyton said.