📝 usncan Note: Why Applebee’s And IHOP Are Struggling
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New York City, USA – August 18, 2022: An Applebee’s Restaurant near Times Square in New York City, USA. Applebee’s Restaurants LLC. is an American company.
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Tech valuations and inflation debates have dominated Wall Street, but something unexpected has been quietly occurring at the dinner table. Casual dining is back in a big way. Chili’s has stunned the market with same-store sales surging 24% and its parent’s stock climbing 300% over the past three years. Olive Garden continues to post steady gains, and Cheesecake Factory has leaned into the boom as consumers rediscover the appeal of value-driven sit-down meals. But while the industry is feasting, Dine Brands, the owner of Applebee’s and IHOP and the lesser-known Fuzzy’s, has gone hungry. Under CEO John Peyton, the stock has collapsed 70% even as he’s pocketed nearly $25 million in compensation. When the whole industry is thriving and one company is still failing, the issue isn’t the economy. It’s governance.
The Casual Dining Boom
Casual dining’s comeback has been sharp enough to earn its moniker: the “Chili’s Economy.” According to the Wall Street Journal, consumers who once gravitated toward fast casual are heading back to sit-down restaurants, not because they’re flush with cash but because they see better value. A family can sit down at Chili’s, order off a streamlined menu, and leave feeling they’ve gotten more for their dollar than at a fast-casual chain selling $17 salads. Chili’s resurgence is no accident. Management simplified the menu, invested in sharper marketing, and leaned into value without racing to the bottom on price. Olive Garden has applied the same discipline, consistently drawing traffic through value-driven promotions. Cheesecake Factory, a brand often criticized for excess, has repositioned itself as an “experience” that resonates in today’s market.
This is happening against a macro backdrop that should have been challenging. Inflation is still high, personal budgets are tight, and yet consumers are choosing casual dining when it delivers both value and atmosphere. The industry tailwinds are clear, and the winners are proving that execution pays. This is why Dine Brands’ failure to participate in the boom looks less like bad luck and more like negligent leadership.
Brinker International, Inc.—Parent of Chili’s
Barchart
Dine Brands’ Failure to Capitalize
The contrast with Dine Brands could not be sharper. Applebee’s recently managed its first quarter of same-store sales growth after eight consecutive declines, a faint improvement, but one that pales in comparison to the surge at Chili’s or the steady gains at Olive Garden. Despite a casual dining environment that should benefit everyone, IHOP, once a category leader, continues to underperform.
Shareholders have paid the price. Since John Peyton took over as CEO in January 2021, Dine’s stock has collapsed by roughly 70%. At the same time, Peyton has collected nearly $25 million in compensation. That mismatch, where management is rewarded while shareholders are punished, is a classic sign of weak governance.
The numbers don’t lie. Peers are thriving in the very same economy that Dine’s board and management blame for their struggles. Investors don’t need another earnings call filled with excuses about macro headwinds when the rest of the industry is growing. The casual dining boom has exposed Dine’s underperformance. It isn’t the customer or the economy holding the company back. It’s leadership and oversight.
Why Governance Is The Core Issue
When the whole industry is thriving and one company is still failing, the issue isn’t the economy; it’s governance. Poor oversight has allowed weak leadership to persist, rewarding management while shareholders and franchisees absorb the losses.
A healthy board challenges management, refreshes its ranks, and adapts to shifting dynamics. Dine has done none of that. The result: $500 million of high-cost debt, no franchisee voice in the boardroom, and a brand drifting while peers surge.
The structure is stale and insular, with glaring blind spots. There is no direct franchisee representation, although franchisees generate the overwhelming majority of the system’s revenue. The board has shown little appetite for rigorous capital oversight, leaving the company saddled with $500 million in high-cost debt that continues to drain flexibility. And the group lacks operational expertise needed to keep Applebee’s and IHOP relevant with younger demographics who are driving casual dining’s current revival.
Governance is the practical difference between a company like Chili’s, which refocused and executed, and Dine Brands, which has drifted. Without independent, experienced directors, the board has become a rubber stamp, approving misaligned compensation packages and tolerating underwhelming strategies while shareholders and franchisees shoulder the consequences.
Casual dining is working everywhere else; Diné’s board just isn’t working for shareholders. No amount of marketing campaigns or menu changes will reverse the trend unless the company changes its structure and restores accountability. Governance must come first because it determines whether leadership can deliver results.
The Playbook Is There
The casual dining playbook is not a mystery. Chili’s has shown how a struggling brand can find its footing again. Management simplified the menu, sharpened the value proposition, and leaned into marketing that resonates with younger diners who want more than just a cheap meal. The result has been a surge in traffic and a threefold increase in the stock price.
Olive Garden has built strength by staying consistent. Operational discipline, a clear value orientation, and a loyalty program that keeps customers returning have all contributed to steady performance. Cheesecake Factory has played a different game but with the same lesson. Its wide menu variety and positioning as an experience rather than just a meal have kept it relevant even as consumer spending has tightened.
Applebee’s has the same ingredients. It has a national scale, strong brand awareness, and a large customer footprint. What it lacks is leadership capable of executing with clarity and discipline. Investors have seen what happens when boards ignore this need. TGI Friday’s resisted governance reform and operational change, and the brand eventually spiraled into bankruptcy. Without reform and operational change, Dine risks following the same path. The opportunity to act is now. We need the right leadership at the board level to restore accountability and give the business a chance to perform.
The Path Forward
The fix for Dine Brands does not start with another marketing campaign or another round of cost cutting. It starts with the board. Shareholders deserve a board that brings the skills and perspective that have been missing for years. That means capital allocation expertise to restructure the company’s $500 million of high-cost debt and refocus investment where it can actually generate returns. It means operational leadership that can modernize the Applebee’s and IHOP playbooks and make them relevant again to younger customers who are choosing Chili’s and Olive Garden. And it means franchisee representation to reconnect the boardroom with the operators who run the restaurants and understand the guest experience firsthand.
The type of leadership that is needed is not theoretical. It is financial discipline, the kind that someone like Chris Marshall has demonstrated across restructurings and shareholder-driven transformations. It is operational turnaround credibility, the kind of background Tom Levison brings as a leader who has rebuilt underperforming businesses from the inside. The Edge is proposing changes to the current vacant board seats and is in dialogue with the company. Despite their exclusion from the boardroom, franchisee and operator voices drive most of the system. Governance reform is not optional for Dine. It is urgent, and it is the only way to stop the decline and seize the opportunity that the rest of the industry is already proving is real.
Cheesevake Factory
Barchart
What Is Needed Right Now
Casual dining is booming, and the industry has already shown the path for success. Investors are rewarding the boards that execute with discipline and vision. The reason Dine Brands has missed out is not customers or macro headwinds, but shareholder and franchisee drift. Weak oversight has protected management while shareholders have absorbed losses. At The Edge, we have taken a 1% equity stake in Dine Brands primarily because of the failure of Applebee’s and IHOP and because we see both the problem and the opportunity. We are pushing for change that brings financial discipline, operational credibility, and franchisee representation into the boardroom. Shareholders do not need more excuses. They need directors who can deliver. The Chili’s economy proves casual dining works. The key consideration is whether Dine Brands’ board will ultimately allow it to operate in the best interest of shareholders and inspire the franchisees. Right now, they aren’t.
