Applebee’s Chain Tests Loyalty Program as Sales Stumble

After trying to lure customers with quesadilla burgers and two-for-$20 dinners, the Applebee’s chain has a new tactic: a loyalty and rewards program.

The restaurant is testing Applebee’s Perks in about 160 U.S. locations, said Dan Smith, a spokesman for DineEquity Inc., the owner of Applebee’s. Customers who sign up for the program can earn free food, discounts and invitations to store events.

Applebee’s, struggling with declining sales, has been working to entice diners with a variety of changes, including remodeled stores, healthier menus and table-top ordering via tablet computers. It also has offered $6.99 lunch combos and new kids’ fare such as vanilla yogurt. Still, sales at Applebee’s locations open at least 18 months fell in the past three quarters, hurt by harsh winter weather and heavy competition.

“We are hitting the reset button at Applebee’s,” DineEquity Chief Executive Officer Julia Stewart said on a conference call yesterday after the company reported first-quarter earnings. “We have to continue to evolve, move faster and think bigger in order to break through and differentiate our brand.”

U.S. casual-dining chains -- restaurants like Applebee’s and Chili’s that offer waiter service -- are underperforming fast-food and fast-casual eateries. Last year, sales at full-service restaurants rose 2.8 percent, compared with a 3.5 percent gain for limited-service eateries, according to Chicago-based research firm Technomic Inc.

Shares of Glendale, California-based DineEquity, which also owns the IHOP pancake chain, have declined 4.1 percent this year. The stock fell 0.9 percent to $80.15 at the close today in New York.

Difficult Balance

With the new rewards program, Applebee’s diners provide their phone numbers as an identification to record their purchases when they visit restaurants. They then get coupons and discounts delivered via e-mail or on the Perks website.

Smith, the company’s spokesman, declined to comment on potential expansion plans for the Applebee’s loyalty program. DineEquity has about 3,600 restaurants worldwide.

Some of Applebee’s peers have held off on offering rewards programs because it’s difficult to get them right, said Bryan Elliott, an analyst at Raymond James Financial Inc.

“You don’t want to necessarily be giving discounts to your best customers or your most frequent customers,” he said. And those going to dinner at sit-down restaurants aren’t always the discount-seeking kind, he said.

“They go where they like because they like it, not because it’s a $1 cheaper than the guy down the street,” Elliott said.