1 00:00:02,960 --> 00:00:06,760 Speaker 1: Bloomberg Audio Studios, podcasts, radio. 2 00:00:06,920 --> 00:00:09,799 Speaker 2: News, dine brands will be taking a closer look at 3 00:00:09,840 --> 00:00:13,120 Speaker 2: the data. The owner of Applebee's and Ihup restaurants reporting 4 00:00:13,200 --> 00:00:15,960 Speaker 2: fourth quarter profit that beat estimates, thanks in part to 5 00:00:16,000 --> 00:00:19,400 Speaker 2: an aggressive promotion strategy. The CEO, John Payton's saying this, 6 00:00:19,720 --> 00:00:22,640 Speaker 2: during the year, we found the guests limited their discretionary 7 00:00:22,640 --> 00:00:25,680 Speaker 2: spend in response to economic pressures, and that this value 8 00:00:25,720 --> 00:00:28,880 Speaker 2: conscious behavior continued in the fourth quarter. While this certainly 9 00:00:28,880 --> 00:00:32,600 Speaker 2: creates challenging and dynamic market conditions, it also allows us 10 00:00:32,640 --> 00:00:36,599 Speaker 2: to leverage our expertise in delivering exceptional value. John paynon month, 11 00:00:36,600 --> 00:00:38,080 Speaker 2: please to say it's with us around a table, JOHNK 12 00:00:38,080 --> 00:00:39,760 Speaker 2: and Mornick, Good morning. I want to kick it off 13 00:00:39,760 --> 00:00:41,280 Speaker 2: with one thing and I mentioned it the commercial break, 14 00:00:41,320 --> 00:00:44,159 Speaker 2: so reaching to continue this conversation. When Walker Hayes put 15 00:00:44,200 --> 00:00:47,239 Speaker 2: together their song just a few years ago, did they 16 00:00:47,320 --> 00:00:49,319 Speaker 2: talk to you about that ahead of time? How did 17 00:00:49,360 --> 00:00:49,960 Speaker 2: that work out? 18 00:00:50,159 --> 00:00:50,199 Speaker 3: So? 19 00:00:50,800 --> 00:00:54,280 Speaker 4: Walker Hayes wrote the Deep Nighted Appleby's song two summers 20 00:00:54,320 --> 00:00:58,520 Speaker 4: ago and it was a gift from above. We did 21 00:00:58,560 --> 00:01:02,000 Speaker 4: not know what was coming. He is an actual Applebee's fan. 22 00:01:02,240 --> 00:01:05,600 Speaker 4: He wrote about date night with his wife at Applebee's 23 00:01:05,680 --> 00:01:08,000 Speaker 4: and he's been an amazing partner to work with. You know, 24 00:01:08,040 --> 00:01:10,320 Speaker 4: we jumped on it. Our marketing team was all over it, 25 00:01:10,760 --> 00:01:13,360 Speaker 4: and so you know that led to the commercial tiktoks. 26 00:01:13,360 --> 00:01:15,480 Speaker 4: He did over one hundred appearances for us. He was 27 00:01:15,480 --> 00:01:18,720 Speaker 4: at our national conference fabulous free marketing. 28 00:01:18,800 --> 00:01:20,920 Speaker 2: How many people are doing date night at applebase now? 29 00:01:20,959 --> 00:01:22,080 Speaker 2: How cost conscious are they? 30 00:01:22,480 --> 00:01:24,680 Speaker 4: Well? Speaking of date night at Applebee's, we just had 31 00:01:24,800 --> 00:01:29,280 Speaker 4: our date night event where we had we had a 32 00:01:29,319 --> 00:01:32,760 Speaker 4: coupon available for two hundred dollars that enabled you to 33 00:01:32,800 --> 00:01:35,720 Speaker 4: eat at Applebee's every week for fifty two weeks with 34 00:01:35,760 --> 00:01:37,800 Speaker 4: a thirty dollars discount, so it was a fifteen hundred 35 00:01:37,800 --> 00:01:40,840 Speaker 4: dollars value for two hundred dollars. We made that available 36 00:01:40,880 --> 00:01:44,160 Speaker 4: at midnight a few weeks ago. It sold out in 37 00:01:44,440 --> 00:01:48,640 Speaker 4: a minute, some some less than a minute. Some commentaries 38 00:01:48,680 --> 00:01:52,320 Speaker 4: said that we broke the internet. Not quite. That we 39 00:01:52,400 --> 00:01:57,240 Speaker 4: added server capacity, we added customer support, and our sites 40 00:01:57,320 --> 00:01:59,520 Speaker 4: might have slowed a little bit, but it was so popular. 41 00:02:00,040 --> 00:02:02,840 Speaker 4: Did it again in Valentine's Day? One thousand date night passes. 42 00:02:03,480 --> 00:02:05,559 Speaker 1: So what are you seeing with respect to where people 43 00:02:05,560 --> 00:02:07,720 Speaker 1: are coming from? Is it the same crowd that's always 44 00:02:07,720 --> 00:02:10,920 Speaker 1: gone to Applebee's that just have more discretionary spending, Or 45 00:02:10,919 --> 00:02:13,360 Speaker 1: do you see people sort of that might have gone 46 00:02:13,400 --> 00:02:17,079 Speaker 1: elsewhere maybe that was more expensive coming to Applebee's or 47 00:02:17,120 --> 00:02:19,520 Speaker 1: going to I Hop for an omelet that's very fluffy. 48 00:02:20,400 --> 00:02:24,359 Speaker 4: A couple of insights at LISA about the consumer We 49 00:02:24,919 --> 00:02:26,680 Speaker 4: get asked that question a lot. Are people trading in 50 00:02:26,760 --> 00:02:29,440 Speaker 4: or out of the category, And from quarter to quarter 51 00:02:29,760 --> 00:02:31,560 Speaker 4: we'll see a few more people come in at a 52 00:02:31,639 --> 00:02:34,400 Speaker 4: higher income level, few more people at a lower income level, 53 00:02:34,880 --> 00:02:38,720 Speaker 4: But over time it's actually fairly consistent. Our core guests 54 00:02:38,760 --> 00:02:42,040 Speaker 4: from a demographic perspective, earns about fifty to seventy five 55 00:02:42,120 --> 00:02:46,560 Speaker 4: thousand dollars a year, and that is literally looks like America. 56 00:02:46,680 --> 00:02:46,760 Speaker 1: Right. 57 00:02:46,800 --> 00:02:49,600 Speaker 4: We've got thirty six hundred restaurants across the country, and 58 00:02:49,639 --> 00:02:54,360 Speaker 4: so our guests are families with children, older couples who've retired, 59 00:02:54,360 --> 00:02:57,680 Speaker 4: who come to ie Hop every day for breakfast. And 60 00:02:57,760 --> 00:02:59,920 Speaker 4: so what we do see from a consumer behavior standpoint 61 00:03:00,080 --> 00:03:03,200 Speaker 4: couple of things. The first is throughout twenty twenty three 62 00:03:03,400 --> 00:03:05,640 Speaker 4: and into twenty twenty four, you know, our guest at 63 00:03:05,680 --> 00:03:09,000 Speaker 4: all three of our brands has been remarkably resilient to 64 00:03:09,280 --> 00:03:12,640 Speaker 4: the extent that it really surprised us a bit. We 65 00:03:12,680 --> 00:03:14,560 Speaker 4: do see from our data that they're eating out one 66 00:03:14,639 --> 00:03:18,240 Speaker 4: or two times fewer per quarter than they did before. 67 00:03:18,320 --> 00:03:20,800 Speaker 4: And when they make their choices, they are still looking 68 00:03:20,800 --> 00:03:24,160 Speaker 4: for full service dining because prices are up almost twenty 69 00:03:24,160 --> 00:03:28,359 Speaker 4: percent in restaurants versus twenty nineteen. And so if you're 70 00:03:28,360 --> 00:03:30,640 Speaker 4: going out to eat and QSR has become more expensive 71 00:03:30,639 --> 00:03:33,200 Speaker 4: as well, they want that experience, they want the service, 72 00:03:33,200 --> 00:03:35,280 Speaker 4: They want everything that we have to offer at Applebee's 73 00:03:35,320 --> 00:03:38,600 Speaker 4: and I Hopit and Fuzzies. Once they find us their 74 00:03:38,760 --> 00:03:42,160 Speaker 4: very value focused and so you know, the percentage of 75 00:03:42,200 --> 00:03:44,560 Speaker 4: our tickets that are taking advantage of our ltos, our 76 00:03:44,560 --> 00:03:47,960 Speaker 4: limited time offers, and our value portion of our menus 77 00:03:48,360 --> 00:03:50,800 Speaker 4: are up a few ticks from where it was before. 78 00:03:50,920 --> 00:03:53,400 Speaker 1: So, then how do you maintain margins at a time 79 00:03:53,440 --> 00:03:55,640 Speaker 1: where we keep talking about the fact that people are 80 00:03:55,640 --> 00:03:58,720 Speaker 1: demanding higher pay. There's a whole question about worker retention, 81 00:03:58,920 --> 00:04:01,040 Speaker 1: there's a whole question about to see input prices of 82 00:04:01,080 --> 00:04:03,600 Speaker 1: a lot of foods and how they have remained sticky. 83 00:04:03,760 --> 00:04:04,520 Speaker 1: How do you manage that? 84 00:04:04,680 --> 00:04:07,080 Speaker 4: Yeah, so margins are the biggest challenge in the industry 85 00:04:07,160 --> 00:04:09,760 Speaker 4: right now, particularly for our owners. We're one hundred percent 86 00:04:09,760 --> 00:04:13,320 Speaker 4: franchise right so the impact of labor costs, the impact 87 00:04:13,640 --> 00:04:17,560 Speaker 4: of cost of goods into the restaurants affects our franchisees directly, 88 00:04:17,920 --> 00:04:20,279 Speaker 4: and so we focus on two things. We're doing everything 89 00:04:20,320 --> 00:04:22,120 Speaker 4: we can to drive the top line right through really 90 00:04:22,120 --> 00:04:25,480 Speaker 4: creative promotions and value offerings, and we work with them 91 00:04:25,680 --> 00:04:28,599 Speaker 4: on re engineering as best we can the bottom line. 92 00:04:28,600 --> 00:04:31,200 Speaker 4: So last year, for example, working with our franchise Ease, 93 00:04:31,440 --> 00:04:35,120 Speaker 4: we took out fifty million dollars in cost across the system. 94 00:04:35,160 --> 00:04:38,440 Speaker 4: And we focus on things that are sustainable and repeatable, 95 00:04:38,520 --> 00:04:40,520 Speaker 4: so technology, process improvement. 96 00:04:40,760 --> 00:04:40,919 Speaker 1: You know. 97 00:04:41,000 --> 00:04:45,239 Speaker 4: One example is we're putting in automated beer dispensers, which 98 00:04:45,279 --> 00:04:48,119 Speaker 4: saves you know, hundreds of thousands of gallons of beer 99 00:04:48,200 --> 00:04:51,760 Speaker 4: a year by having more accurate coores, less and less waste. 100 00:04:51,880 --> 00:04:53,840 Speaker 4: And so that's the way we're trying to automate things 101 00:04:53,880 --> 00:04:55,400 Speaker 4: like that and help them manage their costs. 102 00:04:55,480 --> 00:04:58,520 Speaker 3: Yesterday, Wendy's had received a ton of blowback when they 103 00:04:58,520 --> 00:05:00,359 Speaker 3: came out and they're going to do dynamic price seeing 104 00:05:00,480 --> 00:05:02,560 Speaker 3: they said, no, no, no, we're not going to raise prices 105 00:05:02,600 --> 00:05:05,400 Speaker 3: on busy hours, but maybe we'll offer some discounts online. 106 00:05:05,520 --> 00:05:08,600 Speaker 3: Could you ever see yourself doing that sort of mixed 107 00:05:08,600 --> 00:05:10,560 Speaker 3: prices thing depending on peak and off peak hours. 108 00:05:10,880 --> 00:05:11,040 Speaker 1: Yeah. 109 00:05:11,080 --> 00:05:13,040 Speaker 4: So I come from the hotel industry, right, and I 110 00:05:13,520 --> 00:05:15,520 Speaker 4: led revenue management when I was at Starward Hotels for 111 00:05:15,520 --> 00:05:18,719 Speaker 4: a long time. And as you know with airlines, with hotels, 112 00:05:19,120 --> 00:05:21,440 Speaker 4: no two people pay the same price for the same 113 00:05:21,480 --> 00:05:23,680 Speaker 4: hotel room or the same ticket, depending on what channel 114 00:05:23,680 --> 00:05:25,400 Speaker 4: they purchased it on, when they purchased it, if their 115 00:05:25,480 --> 00:05:28,120 Speaker 4: loyalty status. You know, we've looked at it for restaurants, 116 00:05:28,120 --> 00:05:31,479 Speaker 4: but we don't think it applies to us or our customers. 117 00:05:31,640 --> 00:05:32,240 Speaker 1: At this time. 118 00:05:32,720 --> 00:05:35,800 Speaker 2: We're hearing the words price scouching a lot down in Washington, 119 00:05:35,839 --> 00:05:37,359 Speaker 2: d C. Can you talk to us about what you 120 00:05:37,360 --> 00:05:40,039 Speaker 2: think about that. How difficult is it to bring prices 121 00:05:40,080 --> 00:05:42,080 Speaker 2: back down to where they were a few years ago. 122 00:05:42,960 --> 00:05:46,359 Speaker 4: It's difficult to bring prices back down when labor costs 123 00:05:46,400 --> 00:05:50,159 Speaker 4: are escalated, and labor is pretty sticky, right, it tends 124 00:05:50,200 --> 00:05:53,039 Speaker 4: not to come back down. The cost of goods and 125 00:05:53,120 --> 00:05:56,320 Speaker 4: primarily food into the restaurants has stabilized, and we're even 126 00:05:56,320 --> 00:05:59,799 Speaker 4: predicting some deflation in the cost of goods into the restaurants. 127 00:06:00,200 --> 00:06:03,440 Speaker 4: Be's in twenty twenty four about flat to maybe plus 128 00:06:03,440 --> 00:06:07,359 Speaker 4: one for IHOP When you translate that to pricing, and 129 00:06:07,400 --> 00:06:09,960 Speaker 4: it's our franchisees who make the pricing decisions because they 130 00:06:10,040 --> 00:06:14,440 Speaker 4: own the restaurants typically, you know, pre twenty nineteen. Everything 131 00:06:14,480 --> 00:06:17,720 Speaker 4: is pre twenty nineteen, right these days, our franchisees raise 132 00:06:17,800 --> 00:06:20,240 Speaker 4: prices about two to three percent a year. The last 133 00:06:20,279 --> 00:06:22,400 Speaker 4: couple of years, it's been more in the five to eight, 134 00:06:22,600 --> 00:06:25,360 Speaker 4: nine or nine percent. What we're seeing now with the 135 00:06:25,480 --> 00:06:30,000 Speaker 4: stabilizing of both labor and cost of goods, we think 136 00:06:30,040 --> 00:06:32,520 Speaker 4: they're back on a path to that two to three 137 00:06:32,600 --> 00:06:34,279 Speaker 4: percent over the next couple of years. 138 00:06:34,360 --> 00:06:36,440 Speaker 1: I want to talk about the automatic bear dispenser, not 139 00:06:36,560 --> 00:06:39,080 Speaker 1: because I'm actually interested in the automatic beer dispenser, but 140 00:06:39,480 --> 00:06:42,839 Speaker 1: it sort of highlights the amount and we talk about, 141 00:06:42,960 --> 00:06:44,479 Speaker 1: you know, just you get a little bit less, and 142 00:06:44,520 --> 00:06:46,640 Speaker 1: that's one way to manage a little bit less. 143 00:06:46,680 --> 00:06:47,920 Speaker 4: It's an accurate pool. 144 00:06:47,720 --> 00:06:50,400 Speaker 1: Okay, understandablabor, then you could just make it an accurate 145 00:06:50,400 --> 00:06:51,920 Speaker 1: pore of a little bit less. I mean, how much 146 00:06:51,960 --> 00:06:54,280 Speaker 1: is that something that's going on around the margins? 147 00:06:54,320 --> 00:06:59,600 Speaker 4: So never ever, so our definition of value is is 148 00:06:59,760 --> 00:07:03,880 Speaker 4: great eat food at a really accessible price, an abundant portion, 149 00:07:04,240 --> 00:07:06,560 Speaker 4: right and the experience you have in the restaurant. And 150 00:07:07,120 --> 00:07:10,440 Speaker 4: Applebe's and I Hop and now Fuzzies. But Applebe's and 151 00:07:10,440 --> 00:07:12,440 Speaker 4: i Have in particular have been around for fifty and 152 00:07:12,520 --> 00:07:15,640 Speaker 4: sixty five years, and you know, they've cemented their reputation 153 00:07:15,680 --> 00:07:20,000 Speaker 4: in consumers' minds as the value oriented brand in both 154 00:07:20,040 --> 00:07:23,480 Speaker 4: their categories. And you know, I'm a former chief marketing officer, 155 00:07:23,520 --> 00:07:25,000 Speaker 4: and you know what I've been taught about brands is 156 00:07:25,000 --> 00:07:28,080 Speaker 4: that you people go to brands they know and they trust, 157 00:07:28,520 --> 00:07:30,040 Speaker 4: and you can trust that Apple Be's and ihop are 158 00:07:30,080 --> 00:07:32,320 Speaker 4: always going to have an abundant portion. And that's that's 159 00:07:32,360 --> 00:07:32,960 Speaker 4: sacred for us. 160 00:07:33,000 --> 00:07:35,520 Speaker 2: A pint should be a pint. I'm talking English mashes, 161 00:07:35,520 --> 00:07:37,200 Speaker 2: of course, but a pint should be a pint. B 162 00:07:37,600 --> 00:07:38,320 Speaker 2: noice string flash. 163 00:07:38,480 --> 00:07:40,000 Speaker 4: I just want to say, but warm, the pint is 164 00:07:40,000 --> 00:07:41,400 Speaker 4: always warm, which I haven't understood. 165 00:07:41,400 --> 00:07:43,760 Speaker 2: It's a different kind of pint against that another time. 166 00:07:43,640 --> 00:07:45,960 Speaker 1: To say, in Europe they actually have lines and all 167 00:07:45,960 --> 00:07:48,040 Speaker 1: the wine glasses to have accurate pores, so it's. 168 00:07:47,960 --> 00:07:50,600 Speaker 2: Something that they should have an accurate pull. I've saved 169 00:07:50,600 --> 00:07:52,440 Speaker 2: this to the end of the conversation, because I don't 170 00:07:52,560 --> 00:07:53,800 Speaker 2: know to upset you too much, but this is going 171 00:07:53,880 --> 00:07:55,480 Speaker 2: to sound terribly right, So I forgive me for the 172 00:07:55,480 --> 00:07:57,480 Speaker 2: frame of this question. I'm just blunt British. Call me 173 00:07:57,480 --> 00:08:00,160 Speaker 2: whatever you want. How dependent are you want for twenty 174 00:08:00,160 --> 00:08:02,960 Speaker 2: percent of this country? Rumenicabase? What happens if a zempic 175 00:08:03,000 --> 00:08:05,520 Speaker 2: actually does something abouts it? What happens to you? What 176 00:08:05,560 --> 00:08:07,040 Speaker 2: happens to this organization? 177 00:08:07,800 --> 00:08:11,120 Speaker 4: So the most the response to that is that our 178 00:08:11,240 --> 00:08:13,640 Speaker 4: menu has something for everyone, right And if you went 179 00:08:13,680 --> 00:08:17,640 Speaker 4: to ihop years ago, it didn't have protein based, plant 180 00:08:17,640 --> 00:08:19,800 Speaker 4: based proteins, you know, it didn't have a series of 181 00:08:19,800 --> 00:08:23,120 Speaker 4: egg white omelets, it didn't have gluten free pancakes, you know, 182 00:08:23,160 --> 00:08:25,080 Speaker 4: And the same is true. The same is true at 183 00:08:25,080 --> 00:08:27,360 Speaker 4: applebe So you know, what's important for us is that 184 00:08:27,720 --> 00:08:31,080 Speaker 4: no matter what the dietary orientation is of someone in 185 00:08:31,400 --> 00:08:33,120 Speaker 4: that family, that we have something for everybody. 186 00:08:33,320 --> 00:08:36,560 Speaker 1: So right now, are you factoring in any kind of 187 00:08:36,840 --> 00:08:40,000 Speaker 1: shift from that type of change given the fact that 188 00:08:40,280 --> 00:08:42,880 Speaker 1: there is a pretty rapid adoption for these weight loss. 189 00:08:42,640 --> 00:08:46,400 Speaker 4: Medications, we haven't seen yet any material impact on our business, 190 00:08:46,440 --> 00:08:48,880 Speaker 4: and we're not factoring it in terms of our predictions 191 00:08:48,880 --> 00:08:52,200 Speaker 4: about traffic and comp sales, which really our focus is 192 00:08:52,240 --> 00:08:54,600 Speaker 4: on the menu and ensuring that whether you're at any 193 00:08:54,640 --> 00:08:57,560 Speaker 4: one of the three brands, there really isn't something for 194 00:08:57,640 --> 00:08:59,520 Speaker 4: anyone depending on how they eat and how they choose 195 00:08:59,559 --> 00:08:59,840 Speaker 4: to eat. 196 00:09:00,120 --> 00:09:02,600 Speaker 3: Because of this craze, almost do you feel like you're 197 00:09:02,640 --> 00:09:07,079 Speaker 3: pushed more into being well healthier on your menu? 198 00:09:08,160 --> 00:09:12,080 Speaker 4: That push preceded ozebic, right, So the way Americans eat, 199 00:09:12,240 --> 00:09:16,319 Speaker 4: you know, has been journeying slowly right toward more healthy 200 00:09:16,360 --> 00:09:20,360 Speaker 4: eating over time. So portions changed, Our portions have always 201 00:09:20,360 --> 00:09:22,520 Speaker 4: been the same. It's more about what we're offering and 202 00:09:22,559 --> 00:09:23,840 Speaker 4: having broader menu. 203 00:09:24,200 --> 00:09:27,400 Speaker 1: Can I just ask one more question about the technology investments. 204 00:09:27,840 --> 00:09:30,160 Speaker 1: I'm just wondering, do you think that we will always 205 00:09:30,240 --> 00:09:33,680 Speaker 1: have service in the form of a human I do. 206 00:09:35,800 --> 00:09:38,520 Speaker 4: I use the phrase that we are not a technology 207 00:09:38,520 --> 00:09:42,320 Speaker 4: company that happens to serve food. We're a food company 208 00:09:42,360 --> 00:09:47,360 Speaker 4: that embraces technology. And so, for example, at IHOP, we've 209 00:09:47,559 --> 00:09:50,559 Speaker 4: just rolled out a new POS across the whole system. 210 00:09:50,600 --> 00:09:53,400 Speaker 4: We've got fifteen fifty restaurants to go, and with it 211 00:09:53,440 --> 00:09:55,959 Speaker 4: came handhelds for all of our servers, and so our 212 00:09:56,000 --> 00:09:59,280 Speaker 4: servers love it because they're turning tables faster. They're making 213 00:09:59,440 --> 00:10:03,800 Speaker 4: more tips. Our franchisees love it because we're turning tables faster, 214 00:10:04,040 --> 00:10:06,480 Speaker 4: and we're also raising the average check because servers are 215 00:10:06,720 --> 00:10:09,240 Speaker 4: attaching beverages more often. Sometimes you forget to put that 216 00:10:09,440 --> 00:10:11,480 Speaker 4: soda on the tip when you're on the check, when 217 00:10:11,520 --> 00:10:14,079 Speaker 4: you're really busy. So it's it's technology like that that 218 00:10:14,160 --> 00:10:17,120 Speaker 4: we're using to enable the experience. We're also allowing guests 219 00:10:17,440 --> 00:10:19,400 Speaker 4: via our app if they want to order in advance 220 00:10:19,480 --> 00:10:21,600 Speaker 4: and then seat themselves at the table, then they can 221 00:10:21,640 --> 00:10:23,559 Speaker 4: do that. But it's more about how they want to 222 00:10:23,559 --> 00:10:25,240 Speaker 4: interact with us and giving them all those options. 223 00:10:25,400 --> 00:10:27,400 Speaker 2: John, this was great. I promise never ever to share 224 00:10:27,440 --> 00:10:28,800 Speaker 2: the secret ingredient in the omelet. 225 00:10:28,920 --> 00:10:31,160 Speaker 4: Okay, I have no idea what you're talking about. 226 00:10:31,240 --> 00:10:33,000 Speaker 2: John, Thank you. Jump paid on the time friends, John, 227 00:10:33,040 --> 00:10:34,800 Speaker 2: thank you very much. This is great. Appreciate it.