John Peyton, CEO, of Dine Brands, parent company of IHOP and Applebee's, joined Cheddar News to discuss the company's latest earnings results and venture into fast casual with the acquisition of Fuzzy’s Taco Shop.

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Applebees, IHOP Parent Dine Brand Adds Fuzzy’s Taco Shop to Portfolio

Dying brands, the parent of casual dining chains like Applebee's and Ihop reporting fourth quarter results this morning and the company exceeding expectations on earnings posting adjusted profit of a dollar and 34 cents a share a revenue and same store sales missing the mark though. Earlier I spoke with john Payton here on set, the Ceo Dine brands who did shed some light on the company's results and what's ahead? Take a listen. What we saw is that our guests and american consumers in general still want experiences. They're willing to come out of their houses and they're willing to spend money for experiences. And they went to brands that they know deliver great value like Applebee's and Ihop and so that was a big payoff for us because we've spent years building that reputation and we became a place where people wanted to gather and that was consistent throughout the entire year last year and Apple's Applebee's Ihop, they've long been portfolio companies, right? Obviously brands associated with your company or overall company dine brands, but I know your company also recently acquiring a new taco brand. Tell me more about that. That's right. So we grew by acquisition when I bought Applebee's 14 years ago and then in december we bought fuzzy's taco oh shop, which you may not know from being up here in new york, but they started in texas and they're now in in colorado and Oklahoma, they've got 100 and 40 restaurants and it's a great brand, they like to call themselves sassy and badass things like their hot sauce, they call um, but burning sauce christian. So it's just a fun place to be with great food, amazing TVs, music, really great bar business And we think it's gonna be great growth vehicle for us. How did you decide that you wanted to add that to your portfolio? So we've been looking to add a third brand to our portfolio for a couple of years and have looked at a whole lot of prospects, but we have criteria about wanting to find another brand that was close to 100% franchise. Like we are same business model, both positioned as value oriented within their category. So Taco Fuzzy's is the same way as Applebee's and Ihop. Uh, and we wanted to be in that mexican ethnic category as well as fast casual, which is new for us because they're both growing really quickly. Let's talk about the state of the consumer, We do know in some places, consumers are pulling back in the higher prices really across many sectors and I would still put food very much in that category as well. So during this holiday quarter for you, the results that you just unveiled, are you starting to see any changes in consumer habits and their willingness to spend as we're now two months into a new year? Well, they finished the fourth quarter strong and that momentum has been carrying into the, into the new year, You know what I'll tell you about consumer behavior is our average check at both brands was about the same all four quarters, even though our franchisees raised prices 7 to 10%. So in order to manage that check, we can see that our guests were finding some of the more value oriented options on our menu and they really need to navigate our menu. Well, what about prices? Everyone wants to know our price is going to keep Rising. How do I budget for that myself? Of course you have a franchise model as you've been discussing here. But for people who go to Applebee's who go to Ihop, we're now going to go to fuzzies, what can they expect in terms of prices. So so here's a way to think about prices, cost of goods into the restaurant last year. Food packaging chemicals grew about 20% last year, peak during the summer and started to fall in the second half of the year. Our franchisees raised prices like I mentioned 7-10%. So about half of inflation. The good news for our guests is that as the cost of goods continues to Grow less quickly, that puts less pressure on our franchisees to raise prices. The typical franchisee raises prices 2-3% annually and I can't tell you when we get back to that, but I think we're on a path back to that eggs. I assume probably I have eggs might not be the most popular option right now considering egg prices. So for example, Applebee's had 20% inflation of its cost of goods in the first half of the year, Uh low to mid teens. In the second half, I hop 20% beginning of the year, 19% in the back half of the year, driven by eggs and driven by wheat. And we think it will take 6 to 9 months before the nine to even 12 months before the egg situation works itself out. Alright, so maybe out for some bacon, if you're going to Ihop, that might be the takeaway there, john Payton Ceo of Dine Brands, a publicly traded company here at the stock exchange, thanks to john