IHOP will add two more virtual brands to its delivery-only portfolio in the near future, Dine Brands CEO John Peyton said. Virtual brands work well at IHOP because they complement the chain’s business model, which has heavier traffic earlier in the day and additional capacity during dinner and late-night day parts, he said.
The chain continues to drive sales from its virtual brands and burgeoning loyalty program, dubbed the International Bank of Pancakes, which launched April 2022 and now has 6.5 million members.
IHOP’s domestic same-store sales rose 2.1% during the second quarter, marking the chain’s ninth consecutive quarter of growth. Off-premise made up 20% of IHOP’s overall sales, 13% of which came from delivery and 7% from carryout, while its loyalty program drove 6% of sales during the second quarter, Peyton said during a Thursday earnings call.
The restaurant currently has four virtual brands. TenderFix and Pardon My Cheesesteak launched in the first quarter, after IHOP started testing virtual brands last year with its Thrilled Cheese and Super Mega Dilla concepts.
“Virtual brands are successful, and they only work when you have a business model that complements them,” Peyton told Restaurant Dive.
IHOP’s dinner and late-night dayparts allow the chain to offer items like cheesesteaks and quesadillas that tend to be popular during evening hours.
Virtual brands can also help IHOP franchisees return to a 24/7 operation and don’t require additional staff to operate off-premise. Comparatively, sister brand Applebee’s has stopped actively growing its virtual brand Cosmic Wings, since it resulted in some additional operational complexities in its restaurants.
Driving more engagement through International Bank of Pancakes
IHOP’s rewards program is “absolutely a key strategy,” Peyton said, especially as it boosts diner engagement. The company is reporting over 8,000 downloads of its app a day, more than three times the download frequency prior to the loyalty program’s launch, he said. International Bank of Pancakes was designed to drive traffic and share of the wallet.
“What we're learning now after the first year is … how to communicate with guests where they want, when they want, how they want, with relevant messages to help drive traffic,” Peyton said. “The next stage is getting better at the communication piece.”
IHOP would like to improve engagement and sales to mirror the performance of sister brand Fuzzy’s Tacos, which Dine acquired last year. Fuzzy’s has about 500,000 loyalty members across 140 stores that drive 12% of sales, which Peyton said is impressive given the chain’s comparatively smaller store count. Ideally, he’d like IHOP’s loyalty program to also drive 12% of sales.
Applebee’s has been closely monitoring these two loyalty programs to see if a rewards program could work for it as well, but Peyton didn’t indicate if anything is in the works at this time.
“Because of our multi-brand portfolio, we can design and run initiatives in one brand, get them to a point where we're confident and then roll it into another brand,” he said.