FSR May 2023

FEATURE

neighborhood, to more neighborhoods in the U.S.—that would probably be the crowning achievement of my career at Applebee's, and that's what I'm striv ing for.” On the development side of things, Moralejo sees no need to look beyond the brand’s current portfolio of franchi sees to grow its domestic footprint. But in the meantime, working hand-in-hand with operators to address any deficien cies in the model will precede looking at expanding to new markets. “We're going to work on fixing that value proposition. We need to make sure that our franchisees are comfortable with the returns on investment that a new res taurant build will provide for them,” he

sees with their EBITDA (earnings before interest, taxes, depreciation and amor tization) and profitability, and look for ways to optimize operations for owners. “And you know, we may need to con sider different types of prototypes going forward to improve that value equation for our franchisees,” he notes. LOOKING AHEAD: TECH AND OFF-PREMISES CHANNELS An Applebee’s franchisee first tested out integrating a drive-thru pick-up window in 2021 in Texas. Now, there are 10 pick up windows across the system in the U.S. as of press time, and those restaurants have experienced an increase in sales since being implemented. “We’re excited and happy with the results that we’ve seen,” Moralejo says, adding that guests “really like what they’re seeing; it’s a lot more convenient.” Sales mix in the fourth quarter was 76 percent dine-in and 24 percent off premises (13 percent to-go and 11 per cent delivery). Moving forward, nearly all new builds will include pick-up win dows, as well as in restaurants that undergo significant remodels. Like many restaurant leaders dur ing the pandemic, Applebee’s launched a virtual brand. Called Cosmic Wings, the digital-only menu featured Cheetos Boneless Wings, Cheetos Double Crunch Bone-In Wings, Cheetos Cheese Bites, and more. Partnerships with DoorDash, Uber Eats, and Grubhub helped acceler ate the Cheetos-themed brand to new markets. But as guests began returning to dining rooms, Applebee’s began wind ing down the delivery-only channel. “It doesn't mean that we're down on virtual brands,” Moralejo says. “What we found, though, is that the virtual brands that we have experi mented with in our restaurants, there were some operational issues with exe cuting; it added an extra layer of oper ational complexity,” he continues. “And we just felt that we were better off focus ing on our core menu items, focusing on our average unit volumes in our restau rants, and focusing on the experience inside our dining rooms versus enter

ing this new channel.” Cosmic Wings is available in more than 600 markets nationwide, and remains an optional program for Apple bee’s franchisees. That means guests can still enjoy Cosmic Wings traditional and boneless wings, fries, and shareables delivered to their doors. “Ironically enough, the proliferation of the off-premises business in the res taurant industry I think has created an incremental pressure to increase your game when you're dining in, because the off-premises dining experience has been elevated over the last few years,” Moralejo adds. “And as we sort of elevated that part of the business, the expectations from the guests when they do go to your restaurant and dine in have been elevated as well.” Now that COVID is increasingly dwindling in the rearview mirror, Moralejo wants to focus on remodeling restaurants, which got deferred during the pandemic. For example, Applebee’s is in the process of rolling out a new POS system, and also has handhelds in 500 restaurants so far. Looking ahead, a “Kitchen of the Future” project is in the works at eight Applebee’s restaurants, and though Moralejo couldn’t talk specifics, he mentions looking into new back-of the-house equipment to improve prod uct quality and consistency, plus poten tially save on labor costs. Applebee’s is making “big plays” in terms of technol ogy investments, from updating its app and website to testing lockers and dedi cated off-premises delivery areas, plus a recommendation engine program. “We're working with our franchi sees to define the critical elements of a remodel program,” Moralejo says. “And if we do those two things, if we continue to build on the relationships with our franchisees, which is a strate gic asset, and we continue to deliver on our value promise to our franchisees, then the guests are going to win, and you're going to see us grow our num ber of Applebee's restaurants domesti cally and bring more restaurants to more neighborhoods in the U.S.”

says. “Once we've tackled that, then we can talk about who's the right party to develop and where we're going to go.” Moralejo lists inflation and the ris ing costs of real estate, development, construction materials, and difficulty in accessing capital as factors outside of the brand’s control. However, he tells his team to focus on what they can control, such as top-line sales, assisting franchi

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