DIN Applebee’s Rainbow of Market-Share Opportunities
With the Applebee’s concept owned and (nearly 100%) franchised by Dine Brands enjoying its best same-store sales year in 2018 (up by +5.0%) in about 25 years, there are multiple reasons why the recent target range for full-year 2019 of +2% to +4% unveiled by parent company Dine Brands (DIN; Buy) surprised to the upside. These reasons include efforts by the concept to get back to its roots (winning back guests by making Applebee’s more true to what brand Applebee’s is supposed to be all about in the minds of its guests) and lapping two years of bad same-store sales (down by -5.0% in 2016 and down by -5.3% in 2017). This report will focus on another, in our view underappreciated, aspect of why Applebee’s resurgence continues to be better than the Street anticipates: Applebee’s ability to take market share from smaller, privately-held bar-and-grill rivals. We would not be surprised to see many of these rivals continue to struggle over 2019-21, all else equal being an opportunity for Applebee’s to gain market share within the bar-and-grill segment. We maintain our Buy rating on DIN, and note the following: