Dine Brands Global (NYSE:DIN) reported higher third-quarter revenue and modest same-restaurant sales growth at Applebee’s and IHOP, while adjusted earnings before interest, taxes, depreciation and amortization held steady and cash flow declined as the company invested in restaurant remodels and conversions.
The company also rejected an unsolicited offer that its board determined was inadequate and substantially undervalued the business, CEO John Peyton said on the earnings call. Dine Brands recently adopted a stockholder rights plan to protect shareholders from opportunistic share accumulations, he said. Management declined to answer questions about the offer.
Total revenue rose 15.1% to $248.9 million from $216.2 million a year earlier, driven by a $36.9 million increase in company-owned restaurant revenue from locations acquired or opened since the third quarter of 2025. Adjusted EBITDA was unchanged at $49 million, while adjusted diluted earnings per share rose to $0.82 from $0.73.
Excluding advertising revenue, franchise revenue declined 1.5%, CFO Vance Chang said. He attributed the decrease to fewer franchise restaurants, lower termination fees from fewer closures and lower proprietary product sales following the removal of gluten-friendly offerings.
Sales Rise Despite Lower Traffic
Domestic same-restaurant sales increased 0.9% at Applebee’s and 0.8% at IHOP. Both brands raised menu prices by 3% to 4% during the quarter, but recorded negative traffic and slightly negative product mix, Chang said.
Applebee’s benefited from a strong July, when promotions including the return of the Dollarita helped the brand outperform industry benchmark Black Box on traffic and sales, Peyton said. The Bacon Cheeseburger Wonton Taco was Applebee’s strongest new appetizer launch since the pandemic, he added.
IHOP outperformed Black Box on traffic for a seventh consecutive quarter and on sales for a fourth consecutive quarter, Peyton said. Higher checks supported sales growth, aided by in-store promotions of higher-priced items, including Dubai Chocolate Pancakes and BreakFEASTS.
Off-premise comparable sales rose 1.8% at Applebee’s and 5.6% at IHOP. IHOP’s catering sales increased 44% from a year earlier, which Peyton attributed in part to new technology and packaging for larger orders.
Peyton said value remained an important consideration for diners. Value offerings accounted for 25% of Applebee’s transactions and 22% at IHOP, levels he described as within their typical ranges and slightly below those of the previous couple of quarters. He also said Dine was seeing growth among higher-income customers, while more price-sensitive guests were more likely to choose quick-service restaurants or stay home.
Investment Weighs on Cash Flow
Adjusted free cash flow for the first nine months fell to $12.8 million from $68.2 million a year earlier. Chang said the decrease primarily reflected lower operating cash flow, including the effects of remodel and development incentives, and higher capital spending on company-owned restaurant remodels and dual-brand conversions. Capital expenditures rose to $31 million from $21.3 million.
Applebee’s had completed 107 remodels year to date, exceeding its full-year target of 100, Peyton said. Remodeled restaurants continued to show at least a mid-single-digit average sales lift, driven by traffic, he said.
Dine owned 136 restaurants at the end of the third quarter, representing approximately 4% of its system. Chang said the company does not currently see a reason to add to that portfolio and ultimately plans to refranchise the locations. The oldest acquired cohort is profitable, he said, although newer portfolios need more time to improve.
Dual-brand locations averaged roughly 1.5 to 2 times the sales of their original standalone restaurants, Peyton said. He reported 60 domestic dual-brand restaurants open at the time of the call and 14 under construction. In prepared remarks, he said the company was on track for 80 open by year-end; during questions, he described the target as 80 open or under construction.
Company Tracks Toward Low End of Guidance
Peyton said fourth-quarter trends had been mixed, with Applebee’s starting somewhat soft and IHOP continuing its momentum. Dine was tracking toward the lower end of its full-year guidance, he said.
Chang said the company expected fourth-quarter sales volumes at both brands to be similar to those in the third quarter. He also expected fewer construction-related closure days to improve company-owned restaurant performance and support EBITDA, although he said that segment would still report a loss on the EBIT line.
About Dine Brands Global (NYSE:DIN)
Dine Brands Global, Inc is a franchisor and full-service restaurant company that operates a portfolio of well-known dining concepts. Its primary brands are Applebee’s Neighborhood Grill + Bar, which offers casual American dining, and IHOP, which specializes in pancakes, breakfast foods and other all-day meals. The company also owns Fuzzy’s Taco Shop, a fast-casual Mexican restaurant brand acquired in 2022.
Dine Brands generally operates through a franchise-based business model. Independent franchisees own and operate most restaurants under the company’s brands, while Dine Brands provides brand management, restaurant development support, marketing, training, technology and other services.
