Paul Ong

Paul Ong asked if there were any noticeable shifts in consumer behavior across different income or age cohorts during Q4 and early Q1, specifically regarding higher-income guests increasing and lower-income guests decreasing.

Answer

CEO John Peyton stated that consumer behavior was consistent across both brands, with guests seeking 'value and vibe.' Both Applebee's and IHOP saw growth in higher-income guests, while other income categories remained stable. New guests were attracted in Q4 due to product innovation and marketing. Paul Ong also questioned the implications of the projected 50 dual-brand openings in 2026 on total closures, given the net unit guidance of -25 to +5 units for the two brands. CEO John Peyton explained that the development strategy includes multiple products, with dual brands accelerating the pipeline towards positive net unit growth in 12-24 months. CFO Vance Chang added that typical closures are 2-3% of the portfolio, expected to decline due to dual brands saving lower-revenue restaurants and natural franchise agreement expirations.

Paul Ong from UBS asked if Dine Brands observed any changes in consumer behavior across different income or age cohorts during Q4 2025 and into Q1 2026, specifically referencing previous trends of higher-income guests shifting in and lower-income guests shifting out. He also questioned the implications of the projected 'at least 50' dual-brand openings in 2026 on net unit growth, asking if the net opening guidance of -25 to +5 units implies 45 to 75 total closures, and how development and closures are expected to trend beyond 2026.

Answer

CEO John Peyton stated that consumer behavior in 2025 was consistent across both brands, with guests seeking both 'value and vibe.' He noted growth in higher-income guests for both brands, while other income categories remained stable. He attributed new guest attraction in Q4 to product innovation and marketing. Regarding development, John Peyton explained that the strategy involves multiple products for franchisees, including dual brands, individual new builds, and conversions, anticipating an inflection point to positive net unit growth within 12-24 months. CFO Vance Chang added that typical closures are 2-3% of the portfolio, a rate expected to decline in future years due to dual-brand possibilities and natural franchise agreement expirations. He also mentioned that dual brands help 'save' lower-revenue restaurants from closure.