Announcer:
From the library of the New York Stock Exchange at the corner of Wall and Broad Streets in New York City, you're Inside the ICE House. Our podcast from Intercontinental Exchange on markets, leadership, and vision in global business, the dream drivers that have made the NYSE an indispensable institution of global growth for over 225 years. Each week, we feature stories of those who hatch plans, create jobs, and harness the engine of capitalism. Right here, right now at the NYSE and at ICE's 12 exchanges and six clearing houses around the world. And now, welcome Inside the ICE House, here's your host, Josh King, of Intercontinental Exchange.
Josh King:
Remember back in Episode 46 of Inside the ICE House when we had the Chief of Naval Operations, Admiral John Richardson in to talk about building and staffing the US Navy to deal with the threats in the 21st century and beyond. Well, that was a big thrill for me, not just because John is an old friend, but also because I'm a lifelong Navy geek. How did that happen, you might ask. A lot of it had to do with Hollywood, John Wayne and In Harm's Way, Cliff Robertson in PT 109, Kirk Douglas in The Final Countdown, Wolfgang Peterson's Das Boot, Denzel Washington and Gene Hackman in Tony Scott's Crimson Tide.
Josh King:
I even dug Peter Berg's Battleship, and I could go on and on. But why am I telling you this? Navy movies, particularly submarine movies, have a certain style to them. So while I was watching TV, not too long ago, a commercial caught my eye. It spoke to me like few others do. It featured a submarine, the USS Pancake on a collision course for a downtown IHOP where BreakFEASTS were ready and waiting for the crew. Let's take a listen.
Navigator:
Captain.
Captain:
What?
Navigator:
There's something big ahead. There's eggs, bacon pancakes, french toast, some sort of breakfast.
Captain:
That's no breakfast. That's a BreakFEAST from IHOP.
Navigator:
What's our course, captain?
Captain:
Head straight for it. Captain's got an empty tum tum.
Entire Crew:
Pancakes.
Captain:
Ding dong.
Speaker 6:
BreakFEASTS, order online and save five bucks.
Josh King:
How does a CEO make the call to direct his or her marketing chief and advertising agency to create and air such a masterpiece. Inside the ICE House today, fresh from holding his quarterly earnings call right here at the New York Stock Exchange is Steve Joyce, CEO of Dine Brands Global. That's N-Y-S-E-D-I-N. One of the largest full service dining companies in the world, and franchiser of Applebee's and IHOP. Earlier in the day, Steve and his executive team took their seats right here in the library to host their quarter one earnings call. I can only imagine they powered through a sea of questions from analysts, with bottomless coffee and plates of pancakes. I'm eager to pick Steve's brain on the current state of casual dining, how consumer insights are driving business development and his plans to expand Dine Brands' global footprint. That it's right after this.
Speaker 7:
Now a word from Jennifer Tejada, CEO of PagerDuty, NYSE ticker symbol PD.
Jennifer Tejada:
PagerDuty is a digital operations' management platform leveraged by developers, customer support, IT and security, to help ensure that the brand experience for their end. Consumers runs perfectly all the time. Our organization reflects the diversity and the richness of our community. We're really excited about global impact. We chose the NYSE, because it's a place where iconic companies are truly born in the company of giants.
Josh King:
Sitting across from me today is the man responsible for overseeing the Applebee's and IHOPs that millions of consumers have come to love. Steve Joyce is nothing short of a franchise powerhouse. After graduating from the university of Virginia, with a degree in commerce, Steve didn't have to travel far to start his career in business. His first job was with Marriott International, headquartered right out to out of Washington, DC in Bethesda, in corporate internal audit and operations, helping to, you guessed it, develop Marriott's franchise growth.
Josh King:
Over the next 25 years, Steve worked through the ranks, becoming EVP of Global Development Owner and Franchise Services. And from there, Steve joined Choice Hotels International, that's N-Y-S-E-C-H-H, serving as President and CEO, helping to grow that franchise over 6,700 hotels in more than 45 countries. In 2017, Steve took on his next challenge, a switch from hospitality to the restaurant industry, becoming CEO of Dine Brands. Steve, welcome Inside the ICE House.
Steve Joyce:
Thanks. Glad to be here.
Josh King:
This morning, Dine Brands hosted its quarter one earnings call, right here at the NYC. Did you have any comfort food on hand, while you helped calm the nerves?
Steve Joyce:
We did not, which was disappointing, which I need to talk to my PR folks about. Because while the catering was done in a very admirable fashion, it was not exactly what we were used to IHOP or Applebee's. But we do like bringing it, because people like seeing it. And we have a lot of fun with it, so that was a great ad. But the thing about, I don't do a lot on the creative side, I do say yes, but what we try to do is we try to, for both brands, try to bring the spirit of what the brands are about to work in the ads. And so the thing about IHOP is, one is, everybody loves it. Two is, our guests, they really don't want us to take ourselves too seriously.
Steve Joyce:
So this idea of kind of a little edgy humor, where we're going to run a submarine into a restaurant, or before that, we ran an airliner into a restaurant, there's a lot of different ways for us to show that to the guests, but they appreciate the fact that they think we're edgy. They think we're innovative. They think for a brand that's been around for a really long time, that we're a new brand on the come. That's what's really exciting. It's hard to do in the restaurant business, but we've got great folks working with us. We've got great folks on the creative side. But it's an attitude about, let's make sure that we're given the guests what they want from us, which is an incredible dining experience, with memorable food and things that are comforting to them, right, in both brands.
Steve Joyce:
But at the same time, putting in a personality to it that people like. And so when we ask people about our brand, what they say is, "That's a new, innovative brand." They don't talk about it in venerable terms. They talk about it in new exciting terms, because we do things. Like when we did the IHOB program last year and potentially, potentially said, maybe we'll change the name to International House of Burgers, people went nuts. We got 44 billion impressions. During the North Korean summit, we were one, two and four on Twitter. The Korean summit was three. So clearly, we attracted some attention. But it's that kind of thing that people have fun with, or people felt very passionate about it, but we want to do that, so that we're part of the conversation. We have a very young audience in both brands. Half of our customers are under the age of 34, so they're very social media adept. We dominate social media.
Steve Joyce:
There's a lot of discussion, whether or not it's about Dollarita at Applebee's, or whether it's about the burger promotion, or there's some new things that we're going to introduce. When we did the Grinch for the end of the holidays last year, that was huge in the restaurants, but the tie-in and the product was really, the food was really great. The green Grinch pancakes were amazing, when we had crumpets and roast beast omelets. But people just like it, because it's entertainment, the food is abundant and incredibly tasteful. And at the same time, we have some fun with it.
Josh King:
I mean, did your creative team, when you had to at least say yes, I mean, did you connect at all with sort of the genre of these sailors in the middle of the submarine that are somehow going to drive up into this parking lot?
Steve Joyce:
They don't let me anywhere near this stuff. That's the thing, is all the fun things that happen around the advertising and the marketing get done away from the office and they don't even invite me to come. I do get to review and approve what we're going to do, but we have an incredibly creative team and incredibly creative agency working with us.
Steve Joyce:
And so they come up with some really wild ideas. Most of them, I look at it and go, "This is really going to work?" But then what we do a lot of is consumer insight and a lot of data analytics, and so we know what resonates with our customers and our guests in a way that we haven't before. That allows us to make better choices about how we present ourselves to our guests and to the public.
Josh King:
For all your franchise owners, is there a way to help them sort of see the vision or the design of these campaigns and get any of their feedback and consensus?
Steve Joyce:
Oh, yeah. All of the things that we do include committees of franchisees that have input to where we're going. Now, we don't do creative that way, because you don't do creative as a committee, right? You do it. But what you do is present ideas and then you get feedback from them. They know a lot, because they're the ones running the restaurants.
Steve Joyce:
They're the ones with the guests, giving them feedback, hearing about how the guests liked or didn't like an ad, or something that drove them to the restaurant, or the way it was positioned. And so, their input's very valuable. We have a great combination of feedback from the franchisees, feedback from our guests, and then some very creative folks, both on the agency side and in-house. It really makes for a great combination. And you can tell, we're doing a lot better than the rest of the folks, if you looked at our results/
Josh King:
I want to, I mean, dive into your results that you announced today here at the New York Stock Exchange. As the captain of the USS Pancake might say, "Let's dive into earnings." You said, and I want to quote you from the call, "Dine Brands delivered another impressive quarter. Our performance and momentum reflect the continued improvement in our core business. We delivered double digit growth in several key metrics. Implementation of multi-prong strategies at Applebee's and IHOP have produced positive results. Both brands reported positive comparable sales for the first quarter lapping over positive sales results for the first quarter of 2018." So Steve, can you take us through some of those multi-pronged strategies you mentioned in the key metrics?
Steve Joyce:
Yeah. So there are a number of things that we're doing and people always say, "Well, what happens if this program doesn't work as well?" I go, "Well, it's not one program. There's nine things that we're doing. Or 10 things that we're doing that we think are driving these results." So first of all, it starts with restaurant and our guests. Our restaurants have never been better run, have never better executed against what the customers want, what our guests want. The food has never been better, never been more abundant, never been more flavorful. We're doing some fun things in the bar on Applebee's. We're doing some fun things with milkshakes at IHOP now, and so a number of things that go on.
Josh King:
Big milkshake fan, what are you doing?
Steve Joyce:
You need to go try these. These are real milkshakes. We're going to combine them with with a burger program, that's going to, I think, going to be really popular. Similar to what we did with some new flavors this year. But the milkshake is, I've had it. It's actually really great. So there's a lot of excitement about that. On the Applebee's side, we're back to doing Dollarita again, which is a huge hit. Everybody just loves to go in and see that.
Josh King:
Explain the Dollarita. It's a $1 margarita?
Steve Joyce:
It's a margarita for a dollar. When we first did it, it went viral and Jimmy Fallon drank one, but he did another one for the strawberry margarita, I think, which was in March, I believe. It's fun when you get that kind of attention and it drives, because people like coming in. So what we know, which is interesting about, first of all, it brings in a younger crowd. It's a 20-something crowd, obviously. But the interesting thing is about it, people think, "Oh, they're coming in and buying dollar margaritas and then they're leaving." They all buy food. Not only do they buy food, they buy more food than our average customer.
Steve Joyce:
It's not people coming in and slamming down several of these margaritas, because they're... You can't drink that many of them, and you certainly can't drink them without eating. It's a great combination of bringing something fun in, something colorful. One of the big ones from last year that was popular was we had the Zombie for October, and there was even a little video that went with it. But it was a very colorful drink with a floating brain in it, and the biggest question was, "Can I get two floating brains?" The idea is make it fun, make it interesting, make it colorful, and that leads to a lot of interest in people coming into the restaurant and experiencing it.
Josh King:
You also said on the call, Steve, "We're taking a long-term approach to managing the business and focusing on platforms that will deliver sustainable positive results. This includes expanding our off-premise business at both brands and investing in guest facing technology where we have made foundational changes to further enhance the guest experience." Steve, you've got to have a smile on your face with news like this. Tell me what do you mean by expanding our off-premise business and investing in guest facing technology? The order online and save five bucks come on for the captain and crew of the USS Pancake seemed to be quite an incentive to beach the vessel in that parking lot.
Steve Joyce:
Yeah. So we're doing a number of things, but a lot of it is enabled by technology. If you look around at the business, that has not been a focal point for the industry, it is for us. Because what we want to do is two things, we want to remove friction points for our guests. So we want to make the guests happier and their experience easier. The great thing about people love IHOP, they're willing to wait 45 minutes in line to go into IHOP. Well, we love that passion, but we also think people really don't want to wait 45 minutes.
Josh King:
45 minutes of their life back.
Steve Joyce:
So we have a no wait program where you can actually sign up and get a time. And so you can come in to the restaurant at that time and you'll be seated. We think those kind of innovations are really going to help the guests even have a better experience. The online ordering is a great program, where not a only is it efficient and quick for you to order, you also can notify us when you're pulling into the parking lot and we'll bring your food out to you. The great thing about all those friction, reducing opportunities on the technology side, pay at your table, right, so on your own device, server tablets, where the server never leaves the floor and everything comes back and forth very efficiently from the kitchen.
Steve Joyce:
All of those things do two things. One is they make the guest experience better. It's quicker. It's at their pace. The food is when they want it, how they want it. Then, at the same time, we get to know our guests better. We have their information, it allows us to have a conversation with them about, "Hey, we notice you like this, and so why don't you come back to the restaurant and we'll give you a discount on riblets, because you like riblets." It gives us a lot of ways to communicate with our customers. The guests love talking about our brands.
Josh King:
We can almost always count on seeing IHOP make the trading flow rounds in March to celebrate National Pancake Day, but you've also started capitalizing on other holidays, for example, National Pizza Day. Let's listen to what you had in store with this clip.
Speaker 10:
This National Pizza Day, if you are planning on having a pizza, forget about it, try a Pancizza instead. What's a pan pizza? I'll tell you.
Speaker 11:
Hold the sauce, hold the cheese, give me buttermilk, please, it's Pancizza. It's a circle in a box and it's fresh from IHOP, it's Pancizza. Order one, maybe four, there'll come right to your door, it's Pancizza. It's the first of its kind, it'll blow your mouth's mind, it's Pancizza.
Josh King:
Now, for listeners trying to imagine what that spot shows, it is a pancake, or should I say a Pancizza, large enough for the entire family to enjoy. Steve, is this simply a stunt? Or should we expect to see this as a new menu item?
Steve Joyce:
I don't think we're going to have as a menu item, but it was a lot of fun. It's actually Pancizza, and we took over a pizza place in New York. There were lines out the door. Everything we do is for a purpose, right? That was to highlight delivery. So we've got a program for free delivery with DoorDash and we created 30 million impressions with that program. I think we got more attention than the pizza places did. Actually, there were three types of pizza. One had icing on it. One, it was a kind of a regular pancake. And then, one did have some more traditional pizza things on it. But they came in both personal pan size, and 15-inch, in boxes like you'd expect your pizza to come in. People just had a lot of fun with it.
Steve Joyce:
I think that's why people think we're interesting, because we looked around and we were like, "National Pizza Day? Nobody talks about that. Well, what if we took it over? That'd be fun." And so we did, and I think we got more interest than anybody did with actual pizza. Our guests think it's fun. We sold a lot of those Pancizzas through delivery. Now, our customers and our guests know that, "Okay, not only can I get IHOP, I can also get it delivered." It reinforced with them that we're a delivery option that they can utilize. In our delivery, actually the things that we actually use, we didn't do it like other people did.
Steve Joyce:
We did a, literally a technology development delivery option that keeps our food hot for 45 minutes. When you get your pancakes from an IHOP, it's not all jammed in a styrofoam container, it's your egg and your meat product below, separated with vented container with your pancake on top, so that when it comes in, it tastes just like it did in the restaurant.
Josh King:
Steve IHOP has found success in social media and virality, as we've been talking about throughout our conversation. I want to focus on one of them and you mentioned it a little bit earlier. Last June, IHOP unveiled its biggest campaign yet, flipping the P in IHOP to a B and briefly renaming the chain IHOB, International House of Burgers. Here's what Squawk Box crew had to say about it on CNBC.
Speaker 12:
IHOP has a new name, you probably heard about it. At least for the time being, the International House of Pancakes will now be known as IHOB. The B is not for blockchain, or bacon, it's... I thought it was for breakfast, International House of Breakfast.
Speaker 13:
I thought it was for breakfast too.
Speaker 12:
It's not it's for burgers. The breakfast brand is betting on breakfast and dinner with a new line up of steak burgers.
Speaker 14:
And we've got at them right here.
Speaker 12:
We do, and need to be, need to be tried, at least a bite.
Josh King:
Just a bite in the morning, Steve. Now, you ultimately return to the legacy name IHOP, but not without claiming, as we talked about, 44 billion earned impressions, quadrupled burger sales across the chain, and 1.8 million mentions of IHOB on Twitter. Those numbers must make marketer's dreams come true, but has the buzz been long lasting or was that again sort of a short term thing?
Steve Joyce:
No, there's some really great things about that. First of all, when you do something like this, you're taking some risks. The funny thing that happened was, within, I don't know, several days, two professors from Harvard and from Wharton said only an idiot would mess with an iconic brand like IHOP. The same professors, 12 days later, wrote these guys have reinvented social media for the next decade. I don't think either one was quite true, but we had a lot of fun with it and we got a lot of people's attention. But what happened was we quadrupled burger sales, and now, we're still selling twice as many as we were. So things worked out really well, from a lot of perspectives.
Steve Joyce:
One is because of that attention, the relative awareness of the IHOP brand moved up. So therefore, when we advertise, our recognition is instantly better. And so, the effect of our advertising is better. The effect of what people hear about IHOP is better, because not only did they pay attention to what we did, people got very passionate about it one way or the other. Some people thought it was great. Some people got really angry. But in the end, I think everybody enjoyed it, but it reawakened people's awareness of, one, IHOP, by itself. So the company and the brand is better known, and therefore, it's more effective.
Steve Joyce:
And then, on top of that, we let people know that we're not just breakfast, that we're a great place for lunch and dinner. And our lunch and dinner sales went up significantly and have stayed up. So you're going to see us doing similar type programs, where we, we're never going to move away from breakfast, but at the same time, we want to have great food for folks. A lot of people eat breakfast for dinner. I've got a lot of friends that they're like, "I want breakfast dinner, that's where I go." But the fact that you can get a great burger, and they are great burgers, and the fact that we're going to introduce some other items this year later on, that are pretty interesting.
Josh King:
You can't give a little preview here Inside the ICE House?
Steve Joyce:
My guys would kill me if I did that. It'll be something you don't quite expect and it'll be an incredible product. The food is amazing. The taste of it, I've had it, is really, really good, and it's going to be fun, and people are going to have fun with it. So it's interesting when you get that kind of a social phenomenon, but it just goes to show you how much people love that brand.
Steve Joyce:
We actually changed the restaurant on Sunset, out in LA, we actually changed the restaurant to IHOP and it became a tourist destination. So the franchisee, we called him up, I don't know, a week later. And she said, so we'll send the folks over and change everything back. He goes, "Yeah, can I keep it for a while?" I go, we're like, "Sure. You can keep it."
Josh King:
How long did stay up?
Steve Joyce:
Like a couple months, because he goes, "I'm full all the time."
Josh King:
I mean, traffic on Sunset is already bad enough. You just made it worse.
Steve Joyce:
And his parking lot was full. He was full all the time. So again, we don't take ourselves very seriously. No one expected the kind of reaction we got, but it was pretty fun while it lasted. I personally, my favorite was International House of Beyonce, but that didn't get a lot of votes.
Josh King:
And I don't know if Beyonce came in any of the stores, but you know, there's still time.
Steve Joyce:
We did get a lot of celebrities tweeting and talking about it. We've got this great sizzle reel that we show, but it just goes to show, once you get the country's attention like that, it's just amazing what happens.
Josh King:
I mean, we've focused a lot on our conversation so far about what the country has paid attention to, the external things that have reflected on your brand, what people buzz about. But let's turn inward a little bit, focus on the culture of the company. Dine Brands adheres to three strategic pillars, people, brands, and growth. Walk me through the role each of these pillars play and how they're interconnected within the business?
Steve Joyce:
Well, there's a reason that people come first, because we're a people business. We don't have real assets. What we have our brands and our brands are represented by our people. Okay? And so when the company was created, it put two separate cultures together, the Applebee's culture and the IHOP culture. There wasn't a lot of work done to blend those two. And you want individual personalities to the brands, because the brands have very different personalities, but you want the values to be the same. And you want people to feel good about where they work. I've never been in a company where people don't want to be some part of something bigger than themselves.
Steve Joyce:
And when they're part of something bigger than themselves, putting the extra effort in is worthwhile. There's got to be something in it for them. What we try to do is pick the right folks, that have the right kind of energy, that want to work collaboratively, that want to be inclusive, that want to do their best, to have a sense of pride in what they do, to reach out and be incredibly inclusive in all things that we... They give respect and dignity to everybody that they come in contact with. Those are values that we will not move away from. They don't need to be written. We have them written on the walls, but they don't need to be.
Steve Joyce:
We talk about them all the time. We recognize people for exhibiting them, and we talk to folks that aren't exhibiting them. If you can't exhibit those values long-term, you're not going to last at our company. What we're trying to do is make it a place where people want to work. So then, the brands. Brands are incredibly important, right? We have two of the, they're the biggest brands in their category, and they've been the first, the number one brands 11 consecutive years. You don't do that by not focusing on individual brands and what is special to them about their guests, about the abundance of the food, and the deliciousness, and the robust flavors. Everybody talks about, "Well, you serve comfort food and people are eating better."
Steve Joyce:
And I go, "Well, let me tell you what I know, 60% of Americans say, when they're stressed, they ask, they say, I wanted comfort food." 90% of American say they've never been more stressed than today. There's a new article out about how stressed people feel. We actually see in our research that the customers feel that we're an oasis. because we welcome them, who they are, we're inclusive, and we make them feel good, and we serve, them great food. Now you can eat clean in both. And we're also going to provide some vegetarian friendly type products that we're bringing into bear, so we have something for everybody, but people love the atmosphere.
Steve Joyce:
They love the fact that we are a welcoming, hospitable environment, and we take you as you are. And so, on the brand side, we're going to continue. In Applebee's, it's eating good in the neighborhood, and at IHOP, it's putting smiles on people faces. That'll carry through if we do more brands, we'll carry that through to that as well. But the-
Josh King:
News here? Are there new brands on the horizon?
Steve Joyce:
We're looking. We don't have anything to announce, but we're looking. On those pillars, they're about not just principles, they're about how we do our business. The more that we live those values, the more that we do, the more successful we're going to be. We've seen it already. The company was in a tough spot, September 17, when I came in, but the company was ready, had already been doing a lot of work, but they were ready you to change. They wanted to change. They wanted to be proud of what they were doing. As a result, we've got some quick wins, which was great. Franchisees are now back in with a great relationship with us. It's a much more fun place. We changed the nature of the offices, because the offices were dark and not very welcoming. All the things that we do are about creating an environment where people can excel.
Josh King:
I want to go back to 2017, a little bit. A number of years ago, well before 2017, two friends of mine, Doug Sosnik and Ron Fournier, wrote Applebee's America: How Successful Political, Business, and Religious Leaders Connect with the New American Community. They talked about at Applebee's as a community meeting place. And yet, as I was getting ready for our conversation, I went back and looked at 2017. The website Eater came out with a series of pieces about the cultural and economic decline of suburban sit down chains. Bring us what it was like to walk in the door two years ago and what you had to do to change things?
Steve Joyce:
Here's the funny thing about all that, and there are chains out there that are struggling. Okay? We're not, but there are chains out there are struggling. But what became the phenomenon, and there were hundreds of articles written about the death of casual and family dining. Okay. The primary reason was, "Millennials don't like it." Well, we took a look at our consumer research, and we took a look at our demographics, and half of our customers are under the age of 34.
Steve Joyce:
So last time I looked, those are millennials, and they love our restaurants. They love the brands. They came there with their parents. They're taking their kids there. Eventually, they'll take their grandparents there, or their grandkids there. So look, there's a certain segment of the population that might not like family and casual dining, we are middle America. We represent the 99%.
Steve Joyce:
Guess what? The 99%, they like casual and family dining. Now, they want it to be distinct. So eating good in the neighborhood, it's not a slogan. We have hometown heroes on our walls. We have the high school coach's picture. We represent the town. We do a lot of neighborhood activities. We're involved with lots of different charities. We take care of veterans at Applebees.
Josh King:
On the veterans, it's no secret. The chains, like Applebee's, are often located close to America's military bases and installations. Members of our armed forces are often deployed for months at a time, reunited with their families for precious little time, and a meal is often a place to reconnect. On Veterans Day. Steve, you open your doors to them serving a million meals to them for free. It does good, of course, but it really establishes this lifetime connection.
Steve Joyce:
Yeah. I think that's important though, because that's what neighbors would do. They welcome back their heroes. Right? What we're trying to do is recognize their service, say thank you. But also at the same time, say we're part of the community, we want to celebrate you. Both brands do that in their own way. We are incredibly supportive of so many charities and do... IHOP does a pancake competition for Children's Miracle Network, where we raise a lot of money for them. But we also take one of the kids that's been sick, and we have a pancake contest, and they create their pancake. They win, we put it on our menus. That's something that that kid's never going to forget, right?
Josh King:
Yeah.
Steve Joyce:
Or their parents, or any of us that comes in contact with them. We do something called Alex’s Lemonade Stand, which raises a lot of money to fight childhood cancer on the Applebee's side. There's just a lot of things. We're involved with the Boys & Girls Club. There's a lot of things that we do and we do it for two reasons.
Steve Joyce:
One is, we do it because we want to be good members of the community and we want to be responsible. But the first or second question that people ask when they come to work at our company, "What do you do to give back?" So it's clear, it's important to our folks that we be part of that. I think that makes us a company where people want to work.
Josh King:
I want to pick up on something you mentioned earlier about the expanding menu and tailoring your menus to people that have different dietetic tastes these days, as diets do change. Parents, like my wife and I, are always concerned about the health of our kids. They love pancakes and waffles, whether we make them at home, or get them at diners, or places like IHOP. But add more to what you said earlier about your vegetarian offerings. What are you and your franchise owners doing these days to address parents' concerns about good nutrition?
Steve Joyce:
Yeah. We've got a number of items on the menus already, which are healthier options. We mark those on the menus about calories and about whatever your sensitivity is. We want to make sure that we can provide a meal for you that's satisfying, that feels abundant, and that tastes great. We're doing that, but we're also doing things that we hadn't done before. We're going to do a vegetarian friendly pancake. For those that want to eat a little differently, we have some restrictions in terms of equipment.
Steve Joyce:
So we can't say we're vegan, but we're going to have non-meat burgers, and they're amazing. We've got non-meat quesadillas, made with some different ingredients, but the spices are unbelievable. The taste is amazing. What we do is somebody says, "Well, ah, I'd never eat that." We substitute what they think as a regular one. And they like, "Ah, that's really good." "You know what that was, that was not meat."
Steve Joyce:
What our chefs are able to do with different ingredients and to satisfy a large group, because what we want to do, we want to make sure that if you're coming with a group of folks that you don't say to them, "I don't want to go there, because they don't have anything for me to eat." We are working really hard to make sure we get there. Plus, we want to make sure if people want to eat healthy, we're going to help them do that. On the other hand, if you want to indulge, we've got indulgence for you.
Josh King:
I make an almost weekly drive to upstate New York to the Catskills. Steve, you have locations in Albany, Clifton Park, Poughkeepsie, Newburg, among others near my route. That's a lot of employees that are needed to staff these establishments in a part of the country where the population of the people, often young, waiters, line cooks, bus people, dishwashers is declining. What are the factors involved in attracting and keeping enough people to staff your locations?
Steve Joyce:
That's a great point, because particularly with the tight labor market, it's getting more and more difficult, but we choose our franchisees based on our principles. We choose franchisees that take good care of their people. Their turnover generally is lower than average is., so they have longer term employees. When we go to our franchisee's annual celebrations, where they celebrate and recognize their team members, there's a lot of long-term, long, long-term team members. The reason being is the folks that work with them, our franchisees, treat them the right way, and they want them to stay, and they pay them competitively, and they treat them with respect and dignity, and they've got upside opportunity.
Steve Joyce:
Everybody looks at the restaurant business and says, "Well, you got a lot of hourly wage jobs." "Yeah. Then you get promoted and then you get promoted again. Then you get..." I don't know a CEO that didn't start out an hourly job. I started out as a dishwasher. I wasn't a very good dishwasher, so it's good I moved up. But the net of this is the restaurant business is one of the best up through the ranks opportunities there are, right? If you are great at your job and you want to move up, you're going to have that opportunity. Certainly there are a lot of entry level positions, which makes immigration important for us, right?
Steve Joyce:
But that's a great way to start employment. Then, the great thing about our business is all of our franchisee train people to move up to the next step. We have a huge university online that we help to utilize that as well. If you want to move from dishwasher to cook, we're going to help you train to do that. Then, your income is going to go up. Then, if you want to move from cook to assistant manager, we're going to help you do that. There are thousands, literally hundreds of thousands of stories like that in the restaurant business, that you don't hear about. What I've seen in this business is that it's ripe for opportunity for those that want to advance.
Josh King:
Where are we going from here, Steve, as we wrap up our conversation, how does the future look for the franchise model? Does it have staying power worldwide? You travel all over the world, looking for how much people might be interested in having Applebee's and IHOP in their countries? Are consumers favoring a variety of smaller family run businesses? If you had to look into your crystal ball, where is this industry headed?
Steve Joyce:
Well, that's the last pillar and that's growth. Growth comes from lots of different places. Let's talk internationally. We just signed a 19 unit deal in Pakistan. Did I think we were going to be in Pakistan a year ago? No, but we went and looked. We found a great franchisee. They run great restaurants there already. We think it's going to be a terrific opportunity. We'll have probably 19 or 20 restaurants within a couple years. We're just opening our first ones in Ecuador, we signed a bunch of deals for multi-unit programs in Latin America and South America last year. We got new deals in Canada. We're trying to get into the UK.
Steve Joyce:
We're looking at deals in Korea. We're looking all over the world. I'm actually only 32 years old, it's just 700,000 miles a year on planes that make me look like this. But look, I've done international business development my entire career, first in the hotel business, now here. IHOP and Applebee's are loved brands globally, and in some interesting places. We're really big in Applebee's in the Middle East. Go figure. We were just over there and what's incredible about, particularly in Saudi, what's incredible about the Applebee's there is they have bars, they're smaller bars, albeit, but they do fresh juice mocktails and different kinds of things, and it can be 35% of the restaurant sales.
Josh King:
Wow. For a mocktail?
Steve Joyce:
In the US, our bar is like 14, 15%. Without alcohol, which I don't think we're going to eliminate, but without alcohol, those juice bars can be a third of the sales of a restaurant. And they treat them like that, they have special glassware, and they look great. So it's an interesting, but then it's a combination of you do relatively the standard menu, but you customize it for the culture. You're very careful about ingredients that people won't eat. You change those out, but also you bring in local flavors.
Steve Joyce:
That's the really fun thing about the international peace, is we'll do different things to bring, whether it's in Mexico, or whether it's in Ecuador, or whether it's in Canada, or whether it's in the Middle East, we'll bring those local flavors onto the menu in a bunch of different ways, so that people have things that they're familiar with, but then they also have the Applebee's or IHOP experience. It's really fun. So international, additional brands. When I started at Choice Hotels, we had nine brands. When I left, we had 13, and I bought two tech companies, so I believe in adding growth through inorganic means.
Steve Joyce:
You have to be really careful. You want to pick the right ones and you want to make sure you make money with them, but we think that's an opportunity for us. Then we, IHOP and Applebee's, just the footprint in the US, they have lots of room to grow and we can grow in nontraditional ways. We're going to put fast casual IHOPs in urban centers. We think that's a really fun thing that people are going to love, because they're going to be, basically, grab and go IHOP. It'll be a little different looking, but the menu will be very similar, and I think people will be excited to see it. And people want it, right? Your options, if you are thinking of breakfast and you want to pick up something, what comes to mind first?
Steve Joyce:
IHOP, right? People want IHOP for breakfast. They want breakfast all day, which we also provide. Then, we're going to introduce them to the great burgers we have. By the way, the Brunch Burger is the best. But we're going to do some new things with the milkshakes, and then we're going to introduce some new things along the burger, like last year, we'll have some fun with, and we'll do another family movie tie-in. It'll be great.
Josh King:
Well, speaking for myself, I can't wait to try the milkshake, and for your next 750,000 miles, just so you get a little less wear and tear, may I suggest that you take the USS Pancake out for a spin. And on your next overseas trip, go underwater on one of your own vessels. What a great show. Steve, congratulations for everything you've done so far. Good luck in the coming quarters and everything you're going to do at Dine Brands.
Steve Joyce:
Thanks so much.
Josh King:
That's our conversation for this week. Our guest was Steve Joyce, CEO of Dine Brands. If you like what you heard, please rate us on iTunes, so other folks know where to find us. If you've got a comment or question you'd like one of our experts to tackle in a future show, email us at [email protected] or Tweet at us @icehousePodcast. Our show is produced by Pete Asch and Theresa DeLuca, with production assistance from Stephan Capriles, Ken Abel and Ian Wolf. I'm Josh King, your host, signing off from the library of the New York Stock Exchange. Thanks for listening. Talk to you next week.
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