Dine Brands' Net Income Falls 35.7% as Remodel Spend Builds

Dine Brands' net income fell 35.7% to $4.5 million in the third quarter ended Sept. 27, as the parent of Applebee's and IHOP poured money into remodels and absorbed costs from a growing company-owned estate. Revenue rose 15.1% to $248.9 million, from $216.1 million a year earlier, but the increase came almost entirely from a $36.9 million jump in company-owned restaurant revenue tied to acquired and newly opened units. Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) held flat.

Earnings per share came in at $0.37, down from $0.48. The company also said it expects to finish the year at the lower end of its financial guidance.

How did the two brands perform?

Applebee's returned to growth with 0.9% same-store sales, recovering from last quarter's declines. IHOP posted 0.8% growth, extending what executives described as seven consecutive quarters of traffic outperformance, credited to its barbell pricing strategy (a menu architecture pairing low-price value items with premium offers to drive traffic across income levels).

At Applebee's, Dine Brands leaned on dual menu innovation and value platforms. Guests responded to the return of the Dollarita and to the bacon cheeseburger wonton taco added to the two-for-$25 platform. Executives cautioned that the fourth quarter has been softer so far.

CEO John Peyton framed the quarter's work on Wednesday's earnings call: "We dialed up menu innovation at both brands, sharpened our operational focus within the restaurants, and rolled out a new marketing strategy to better integrate our brands into the cultural conversation."

What is the company buying with lower profits?

The answer is store-level capital, concentrated at Applebee's. Dine Brands has completed 107 Applebee's "Lookin' Good" remodels and expects half the portfolio remodeled by the end of 2027. Peyton said the facelifts lift sales by mid-single digits, which makes them a rare growth lever in a year when the Technomic Top 500 shows chain restaurant sales slowing as consumers pull back on dining out.

"As we look ahead, we're prioritizing investments that improve both comp sales and the overall footprint of our brand … both to drive more value out of each location and accelerating that work through our company-owned portfolio as well," Peyton said.

The strategy is also physical: dual-brand conversions pair the two chains in shared buildings, and the company-owned portfolio is being used to accelerate the work. The remodels raise upfront costs now, Peyton acknowledged, but he argued they yield long-term returns.

What happens next?

Dine Brands closed one net new restaurant in the quarter, bringing its global portfolio to 3,275 units. The company expects a more challenged fourth quarter for Applebee's, while IHOP should maintain its modest momentum.

Peyton closed with a defensive but composed verdict: "We've managed through different economic cycles, and we've demonstrated our ability to evolve with our guest needs without sacrificing the core of what makes each brand so special."

The bet is straightforward. Dine Brands is trading near-term profit for mid-single-digit sales lifts at remodeled stores, and 2027 is the deadline by which half the Applebee's estate must prove it.