Applebee’s show how to grow

Think of Foodservice in the United States and the first names that come to mind are McDonald’s and Burger King probably. This reaction occurs because of our familiarity with these brands in Europe.

However, a name that may not immediately come to mind for many readers is a company called Applebee’s International, Inc. which has been one of the best performing chains in the US for many years.

Applebee’s has grown from an organization of 250 units 10 years ago to now boasting over 1500 units on a national basis. They have added over 100 units each year of the past decade and believe they can continue with this expansion for the foreseeable future, at least until they hit 2,400 restaurant units.

Applebee’s highest grossing restaurant unit is generating almost $10m per year – it is on 42^nd street in New York, and grew by 20% in the last year. This is not the normal revenue for the business though as average unit sales run at $2.27m.

The Overland Park, Kansas based organization likes to focus on the basics. Lloyd Hill, Chairman and CEO, who has presided over most of the growth shown by Applebee’s says that the strategy is straightforward. Applebee’s is “really very simple. We are focused on food, we are focused on marketing, we are focused on people and we are focused on our to-go strategy” The food strategy is “(O)ur guests want basics as good as the best (burgers, fajitas, salads etc) and some best in class ‘signature’ items.. We have the opportunity to own the price-value proposition”

Menu evolution is a continuous process evidenced by the fact that 50% of the menu has changed in the past 18 months. Marketing strategy also continues to evolve. The casual dining giant has moved away from LTO (Limited Time Offer) strategy which featured just a few specific items to themed events. Hence, they ran a promotion called Skillet Sensations that ran January through March. Price points of $8.99-$10.99 featured Crispy Orange Chicken Skillet, Bourbon Street Chicken Skillet and two steak skillets.

One of the elements which an organization of this size can bring to its marketing campaign is national advertising, a key factor in driving brand imagery if not immediate sales. You as a restaurant owner may not be in a position to afford significant advertising but Applebee’s relies heavily on other concepts that can be implemented by smaller businesses.

It ran an aggressive campaign featuring gift cards during the “holiday” (Thanksgiving and Christmas) season that resulted in a significant lift in gift card sales. The benefit to Applebee’s came through in January when according to Chief Financial Officer Steve Lumpkin, gift card sales accounted for 9% of sales in units. There is not much doubt in this writer’s mind that at least some of those customers would not have gone to Applebee’s, if they did not have the gift cards. Forgive the preaching, but gift cards can grow your business and they are not difficult to implement.

Applebee’s also believe they can grow their business through an increased emphasis on “to-go” sales. Research they conducted indicates that the most important criteria for “to-go” customers were

Food

Pick- up

Packaging

Ease of ordering

In that order!

Packaging is an area where the chain has worked hard and now believes is has a point of difference. Styrofoam is out. New containers have been developed with lids which do not come off. In an effort to ensure that French Fries travel well, they are now utilizing vented packaging to ensure better quality food at point of consumption.

Applebee’s understand that getting “to-go” to work is a different skill to running the interior of a restaurant. They have developed special training programmes for staff including order-taking. In an effort to simplify the process for customers who currently have to come into the restaurant to collect the food, the chain is testing kerb side pick-up at 175 units.

To-go is the fastest growing component in their total mix. It generated 6% of company restaurants sales this past December versus 4% the previous year. Any segment of a business that grows 50% and is profitable is worth backing which is just what Applebee’s intend to do. Currently, the “to-go” business has been supported by local advertising but plans are afoot to go national in 2004. The advertising concept is

“It’s Not Fast Food, its Applebee’s Food To Go, Fast”

It’s not just their food is fast, so is their growth! Aggressive expansion plans into Europe do not seem to be high priority at the moment so you can breathe easily for now.

Conor Cunneen is an internationally acclaimed speaker on strategy, marketing, leadership and strategy. He speaks on foodservice strategy, food service growth, profitable foodservice, foodservice trends in addition to other industries. The author is an award winning humorist and has won the coveted Chicago Toastmasters Humorous Speaker of the Year title. He is author of Why Ireland Never Invaded America – An Insightful Unique Look at Corporate Strategy

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