Applebee’s (NYSE: DIN) is the latest restaurant to jump into the ghost kitchen craze, launching several pilots across the country, DINE Brands CEO John Peyton announced on the company’s Q4 earnings call this week.
DINE is the parent company of Applebee’s and IHOP restaurants.
“Those who win in the new era of restaurants are those who remained resilient and those who invested in new menu and service innovations and new technology during 2020,” Peyton said.
In addition to ghost kitchen pilots in Philadelphia (two locations), Los Angeles and a soon-to-open test in Miami, Applebee’s is experimenting with a new virtual brand, Cosmic Wings, which launched in the past two weeks.
“To clarify, these are low-capital-investment, small-footprint kitchens without a street-front presence designed to satisfy online delivery demand for Applebee’s where we currently don’t have restaurant penetration,” explained John Cywinski, president of Applebee’s. “The business model here appears attractive in the right geographies, where a brick-and-mortar presence may not be feasible.”
“In addition to craveable wings, tenders, waffle fries and onion rings, the team has developed a proprietary menu of Cheetos original wings, Cheetos Flamin’ Hot wings as well as Cheetos cheese bites,” Cywinski said. “This innovation work is exclusive to Applebee’s and the culmination of our ongoing partnership between our culinary and marketing teams, franchisees, PepsiCo and Frito-Lay.”
The menu, he said, was designed to be differentiated and separate from the Applebee’s menu and branding.
“The menu itself needs to be proprietary and perhaps buzzworthy. Our teams need to be able to execute that brand well and the naming was important,” Cywinski said. “We … had a very specific demographic here — … a bit of a male skew, Cheetos lovers, delivery lovers, wings lovers — and given that demographic profile, the naming and the positioning felt quite natural to us, but you’ll notice we did not incorporate the word or the name Applebee’s in that. So Cosmic Wings, we validated that with consumers with that demo in particular. It resonated exceptionally well.”
It is too early to gauge the success of Cosmic Wings, Cywinski said, but he did point out that Cosmic Wings drove $510 of incremental sales per restaurant in its first full week, and has grown each day.
Like most restaurants, Applebee’s and IHOP have been hit hard by restrictions on dine-in capacity limits, but the brands have shifted to more off-premise sales, Peyton said. Off-premise sales, including Applebee’s Carside To Go pickup service, represented about one-third of total sales in Q4.
At Applebee’s, February’s sales mix has maintained that off-premise growth seen in 2020, with 22% of sales Carside To Go and 15% delivery. IHOP saw a similar mix in February, with 16.9% to-go and 17.1% delivery.
Applebee’s is trying to enhance this off-premise experience with the inclusion of a third-party app, FlyBuy, that will notify restaurant staff when a customer arrives in the parking lot. And in Arkansas, a franchisee has opened the first Applebee’s drive-thru window.
“In addition to being very well received by team members and guests, this dedicated drive-thru lane eliminates weather challenges, improves throughput and importantly extends our late-night to-go operating hours,” Cywinski said.
At IHOP, President Jay Johns said efforts have been focused on improving the off-premise experience that were developed at the outset of the pandemic. This will include continued investment in the IHOP Go platform and leveraging its recently introduced IHOPPY Hour service, which offers value-priced items during afternoon hours.