Long known as a suburban staple with a menu featuring tried-and-true entrees and cocktails, Applebee's has been undergoing a transformation of its menu and décor during the last few years. Since December 2007, 90% of the Applebee's menu has been upgraded or changed, according to the company.
The makeovers at Applebee's and fellow DineEquity-owned chain IHOP have certainly attracted the notice of investors, who have sent DineEquity shares to a 52-week high recently, spurred by a strong finish to last year.
In the fourth quarter, Applebee's reported a 2.8% increase in same-store sales, its best showing since the second quarter of 2011. IHOP's same-store sales rose 6.1% in the fourth quarter, representing its highest quarterly sales increase since the first quarter of 2004.
Together, the two chains account for about 70% of DineEquity's total annual revenue.
As part of its revamp, Applebee's is now advertising its shareable and pub plate bar snacks, which includes novel, chef-inspired dishes such fried shrimp with BBQ spice & sriracha chile lime sauce (see photo below), as well as desserts such as churro s'mores. At the bar, drinks such as the Fireball Whiskey Lemonade are sure to appeal to thirsty millennials.
Applebee's restaurants are also receiving a facelift. Franchisees are rolling out sleeker-looking bars with more modern seating, and dining sections for families that are devoid of funky patterned cushioning.
"We have made progress on this notion of the modern grill and bar," said DineEquity Chairman and CEO Julia Stewart in an interview with TheStreet at the world's largest Applebee's, located in New York City.
DineEquity expects Applebee's sales to rise by 1% to 4% this year due to improvements to the chain's décor and menu.
Stewart also sees a significant opportunity for Applebee's to expand internationally. As of the end of 2014, there were 1,870 domestic Applebee's locations, with 26 franchisees operating just 147 sites internationally.
"The international side of the business is small, but a huge opportunity for us in terms of growth," said Stewart. "Internationally, we really have a lot of malls, especially in the Middle East, as it's the place to entertain and go, so Applebee's in a mall is an opportunity."
According to DineEquity's latest annual report, the Applebee's development agreements currently in place call for the opening of 102 domestic restaurants and 19 international restaurants in 2015 and 2016. DineEquity does not disclose same-restaurant sales for international locations.
Meantime, IHOP is also about to undergo a menu revamp, and is starting to roll out a new prototype restaurant.
According to Miller Tabak restaurant analyst Stephen Anderson, IHOP's performance has been the main driver of DineEquity's surging stock price, while Applebee's has more work left to do to close the gap with rivals such as Chili's, which is owned by Brinker International (EAT - Get Report).
"I think Chili's has done a successful job of focusing back on its Tex-Mex roots within the mid-scale bar-and-grill segment," Anderson said.
For the quarter ended Dec. 24, Chili's produced a 4.2% same-restaurant sales increase at franchised locations in the U.S.
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