Wednesday 10 August 2022 06:13 PM People earning more than $75k a year are heading to chains restaurants trends now

Wealthier Americans have swapped high-end restaurants for chains that offer larger portion sizes and deals, as inflation continues to run rampant across the U.S.

Sales at Applebee's and IHOP grew 6 to 8 percent over the three-month period ending June 30 among households earning over $75,000 a year, Dine Brands CEO John Peyton announced in an earnings call on Tuesday. The company owns both chain restaurants.

Peyton said the bump 'suggests to us that guests that often dine at more expensive restaurants are finding Applebee's and IHOP because of their well-known position,' CNN reports.

He claimed that the company's large portion sizes at affordable prices have made the restaurants a go-to spot as Americans fear a looming recession — a model restaurants across the country are using to lure customers back. 

At the same time, though, Peyton said, Dine Brands saw their sales drop a few percentage points among households earning less than $50,000 — which made up about 39 percent of American households in 2020, according to data from Statista.

'We assume they've left us for lower-cost options,' he told investors.

But, he said, he expects those diners to soon return to its restaurants as gas prices start to decline.

'Gas prices have fallen the last 50 days, and that is encouraging for the back half of the year, and why we say that we are cautiously optimistic,' he told Yahoo Finance.

'We know that gas prices do correlate — we do believe that will encourage some of those lower income guests to return to IHOP more frequently and Applebee's more frequently than they have.' 

He noted that the company has historically done well during economic downturns, like the 2008 financial crisis.

Peyton has attributed the company's success to Applebee's and IHOP's goal of being 'value oriented.'

That means 'delicious food [and] generous portions in a wonderful environment at an affordable and approachable price,' he claimed, noting: 'At times like these, when economics are tough for our guests, our brands have particular expertise' in adding more value.

Applebee's avoids straight discounts on its food, and instead offers deals on meal add-ons, CNN reports, like adding a dozen shrimp for just $1 when a guest orders a steak.

The company also provides half-off appetizers after 10pm, and as part of its Top Gun promotion earlier this year, customers who spent at least $25 got free movie tickets.

At IHOP, meanwhile, customers can find discounted items during IHOPPY Hour, which starts at 3pm at participating locations, when entrees, snacks and sides are sold at reduced prices.

It also has limited-time promotions, like ones that allow children to eat for free. 

As a result, Peyton announced in his earnings report on Tuesday, Dine Brands' revenue during the second quarter of 2022 topped expectations.

The company's total revenue grew 1.8 percent to $237.8 million, MarketWatch reports, higher than the estimated $236.4 million investors expected.

At Applebee's locations open for at least a year, the company reported domestic sales rose 1.8 percent, while IHOP restaurants open at least a year saw sales top 3.6 percent.

Dine Brands' stock, meanwhile, gained 4.9 percent over the past three month, while the S&P 500 has added on 3.7 percent.

As of Wednesday morning, it was trading at $74.25 a share.