Applebee’s leaders and franchisees alike admit 2024 wasn’t the best year for the legacy casual dining brand.
Quarterly reports over the last 12 months and going back to 2023 show consecutive declines in revenue for the concept. In its end of year report for 2023, total revenue was $831.1 million, down from $909.4 million in 2022. The trend continued this year, with comparable same-store sales declining 4.6 percent in the first quarter, 1.8 percent in the second and 5.9 percent in the third.
As of September 30, Applebee’s had 1,618 locations, down from the nearly 1,800 it had in 2019.
Some franchisees filed for bankruptcy, including Apple Central KC in Kansas City and Louisiana Apple, with restaurants in Kentucky, Oklahoma, Indiana and Arkansas. Fellow casual dining player TGI Fridays, meanwhile, filed for Chapter 11 bankruptcy protection in November.
“We understand we have work to do and that we’ve underperformed a little bit in 2024,” Applebee’s President Tony Moralejo said. “Quite simply, we didn’t do enough for our guests. We’re a brand that has value as part of our DNA. We try to provide that to our guests, but we were slow to adapt as the definition of value was evolving.”
The sentiment was similar with major franchisees in the brand. Jon Rolph, CEO of Thrive Restaurant Group, which owns 139 locations, said any brand that has exposure to guests who have an average household income under $100,000 has faced challenges, including Applebee’s.
Jon Rolph is the CEO of Thrive Restaurant Group, a large Applebee’s operator.
“We’re experiencing a softness both in traffic and checks generally,” Rolph said. “That’s been true for us this year, though we do see a little growth next year in our forecast. But there are seasons in the restaurant industry where it’s more of a dog fight, and we’re just in one of those times.”
Tim Doherty, president and chief operating officer at 80-unit Applebee’s operator Doherty Enterprises, also described a difficult environment, citing industry-wide headwinds.
“It has been a challenging time to operate restaurants,” Doherty said. “Macro-economic factors made going out to eat difficult, especially to the guest profile that we appeal to. Outside of a couple outliers, 2024 has been a really tough year.”
In tough times, though, both franchisees know what to do, because they’ve been here before. Rolph is approaching 30 years of ownership with Applebee’s, and operates in a wide range of markets across several states. Doherty, meanwhile, has been with Applebee’s since opening two restaurants in 1993.
In times of trial, both Rolph and Doherty said the best thing they can do is go back to basics.
“When the industry experiences periods like this, it’s where you have to focus on the X’s and O’s of the business,” Rolph said. “It’s important to recognize the macro environment that you’re in, and then look at how you can win inside that environment. So, what’s important to us is making sure we’re out-operating our competitors, because when people cut back, they’re going to go to the establishments they trust the most.”
Doherty agreed, and said, “it’s important to focus on the fundamentals.” In the case of Doherty Enterprises, which operates in New York and New Jersey, that means maintaining a strong culture within the organization.
“That’s why we’ve had success and have been in business for 40 years,” Doherty said. “It’s about focusing on the people, because this is a people industry. Our mission is to ‘wow’ every guest, every time, and to do the same for our people, our communities and our suppliers. If we do that, we’ll also ‘wow’ our sales and profits.
“I bring that up because our guests have an option when it comes to where they want to go,” he continued. “I want those guests to come and visit me and our restaurants. And when we go through a challenging time, that’s the only way we can build success. We’re beholden to economic factors. What we can control is the experience for the guests walking in the door.”
Refining and reimagining
While the franchisees said it’s important to commit to operational excellence and maximize good guest experiences with classic strategies, they said it didn’t mean there was a lack of improvement or innovation.
“What I like about a season like this is how refining it is,” Rolph said. “You get deeper into your P&Ls, deeper into leadership development and have a tighter focus on the experience you’re delivering. And we’re long-term people. We’ve been in this industry a long time, and we continue to invest in the brand in times like these, because we find it puts us ahead when the wind gets at our backs again.”
In the case of both franchisees, investments have not only come in the form of new development, but a growing tech stack as well. That has especially ramped up with off-premises sales becoming a major part of their operation.
Doherty said for his Applebee’s restaurants, off-premises sales account for nearly 25 percent of the business. Of those sales, he said about half come through the brand’s carside to-go channel, while the other is with delivery.
President and COO Tim Doherty leads Doherty Enterprises, which has 80 Applebee’s restaurants in its portfolio.
“It was jumpstarted during the pandemic, but now it’s just part of our guest’s journey,” Doherty said. “It’s our responsibility to meet our guests where they’re at, whether it’s in our restaurants or not. We’re making that work as seamlessly as we can with various new technology.”
One example Doherty said has been implemented are delivery lockers where third-party drivers can pick up an order directly from the kitchen. Those lockers can also alert staff if the order has been waiting too long so it can be remade.
“I like to look at that technology, whether it’s in off-premise sales or wholistically, as a way to make us more efficient and provide value to our people and guests,” Doherty said. “I don’t have interest in technology because something’s cool or for technology’s sake. It has to provide a purpose for us. As we continue on in the future and technology becomes more ingrained, we’re going to utilize it to help wow our guests.”
As franchisees invest in improving operations, the franchisor is looking to give the restaurants themselves a whole new look. Moralejo said the brand established a reimagining goal for how an Applebee’s location looks in 2025.
“Our research is telling us that our restaurants are kind of tired looking, and that impacts guest sentiment and the overall experience they have,” Moralejo said. “In 2025, the goal is to refresh the interior and exterior of the restaurants, but do it practically. To balance the impact of the refresh with affordability so we can implement this across the entire system.”
Franchisees critical to a turnaround
The other part of the brand’s strategy to bolster its position is providing more bundle meals for a larger value play.
“Guests wanted more all-encompassing meals,” Moralejo said. “We were pushing our traditional favorites earlier, which are amazing offerings, but not what the guest needed or wanted. We also have some strategic adjustments we’re working on with the marketing side. We’re evolving our strategy to better target our guests.”
Applebee’s already moved on this front as it heads into 2025 with its new Really Big Meal Deal. The $9.99 combo, introduced in November, includes a sandwich, unlimited fries and a fountain drink.
“What we love about Applebee’s, from a sales perspective, is it’s a value-oriented brand,” Rolph said. “So, it’s finding the right value invitation for people and keeping the menu interesting. That’s what I think we’ll see more of in 2025. More development inside of our core menu, we have a great pipeline of food coming next year.”
Tony Moralejo joined Applebee’s as president in January 2023.
All of these rollouts, Moralejo said, will flow through the franchise network, something he has trust in.
“This is a 44-year-old brand,” Moralejo said. “Our existing franchisees, many of them built this brand brick-by-brick, and overcame some difficulties over the years. If we want to test things, like this reimagine program for example, we need our franchisees to raise their hand and say ‘hey, I’m willing to test that. I’m willing to learn and partner with you.’ Tim, Jon, and all of our franchisees are like that. I’d say it’s the magic of the Applebee’s model that makes us resilient.”
“We will have promotions and show our guests we care,” Rolph said. “I think our regulars are going to see from our teams that we’re grateful for their business and how we invest in our restaurants. We continue to be bullish on the brand long term. We’re going to make sure we do our part so our guests feel we’re worth it when they’re choosing how to spend their hard-earned dollars. That’s always been the name of it.”
Doherty also expressed confidence in the company, citing the strength of leadership at the franchisor level along with the parent company, Dine Brands.
“Whatever softness we’ve seen in 2024, I think we have a strong marketing plan going into 2025, and I think that there will be good things to come,” Doherty said. “I think the better economic outlook translates well to growing our sales and traffic.”