Dine Brands Global is looking to develop more dual-branded restaurants, blending some of its new Applebee’s and IHOP restaurants into one eatery under the same roof to save money on real estate and supplies while driving more sales.

Competitors including Outback Steakhouse and the Cheesecake Factory are also looking for property efficiencies. They are planning expansions and remodeling restaurants to capitalize on steady restaurant spending of the past three years after dining room shutdowns of the COVID-19 pandemic’s early months.

"IHOP has a track record of growth upon which to build," Dine Brands CEO John Peyton told analysts during a quarterly earnings call about the chain known for pancakes. Meanwhile Applebee's, a brand that offers ribs among items on its menu, has a focus "on conversions and developing a prototype" with a return on investment that will let the brand resume opening more restaurants than it closes.

Dual-branded restaurants are more common at fast-food chains, including multiple Yum Brands locations that house both KFC and Taco Bell. But more restaurant real estate tests are expected across the United States as analysts note that dual branding can help reduce development costs for expanding chains.

U.S. spending on eateries has held up well across most categories since pandemic-related restrictions were lifted around mid-2021, even as many companies have raised prices in response to elevated food and labor costs.

The National Restaurant Association trade group expects the industry to post a record $1.1 trillion in total sales for 2024, and employment to top 15.7 million by year’s end. U.S. restaurants posted an eleventh straight month of sales growth in January.

Dine Brands and other full-service operators are boosting capital spending to support new development while closing or selling underperforming locations.

Data firm Mordor Intelligence projects full-service U.S. dining sales will reach nearly $325 billion in 2024, with average annual sales growth of 11.3% over the next five years.

To be clear, there are some challenges involved in such a change. The dual-brand concept is more difficult to implement for full-service chains with table service because of differences in menus, kitchen setups and service hours.

Dine Brands Global, based in Pasadena, California, operates more than 3,400 Applebee’s and IHOP restaurants and has opened eight dual-branded locations to date, all outside the U.S. and most recently in Mexico. Each location generates twice the revenue of a traditional restaurant, officials said, prompting the company to consider making the concept a fixture in domestic expansion plans over the next two years.

Peyton said the company is “gaining experience and knowledge as we contemplate introducing this concept in the U.S.” The company has been experimenting with non-traditional formats including drive-up windows for pre-paid food orders at some Applebee’s locations.

Dine Brands is keeping an eye on expansion after posting 2023 same-store revenue growth of 3.5% for IHOP and 0.6% for Applebee’s, with total sales reaching $7.9 billion.

The company plans to add 15 to 25 IHOP restaurants during 2024 while reducing the Applebee’s count by 25 to 35 as part of a pruning of underperforming locations.

Peyton told Nation’s Restaurant News that Dine Brands’ current dual-branded restaurants have the same square footage as a traditional location and “discrete entrances” that allow customers to flow between the two spaces.

The CEO said dual-brand locations could be coming to the U.S. within the next 12 to 24 months and as early as the first quarter of 2025.

Bloomin’ Brands, which operates more than 1,450 restaurants including Outback Steakhouse, Fleming’s Prime Steakhouse and Carabba’s Italian Grill, opened 18 new restaurants in 2023 while closing 41 underperforming locations.

“The majority of these restaurants were older assets with leases from the ’90s and early 2000s,” CEO David Deno told analysts during a quarterly earnings call. “This decision considered a variety of factors, including sales and traffic, trade areas and the investments that would have to be made to improve the restaurants.”

But the Tampa, Florida-based company remains bullish on its development prospects with plans to open 40 to 45 new restaurants in 2024.

“Our development pipeline for new restaurants and relocations remains very robust,” Deno said. “We are opportunistic on relocations and continue to see outsized sales lift on these investments.”

Bloomin’ Brands Chief Financial Officer Chris Meyer said the company plans to invest between $270 million and $290 million in new developments, remodelings and relocations during 2024.

“Our level of capital spending accelerated late in 2023, as our new restaurant pipeline has grown,” Meyer told analysts.

The Cheesecake Factory opened nine new restaurants during the fourth quarter of 2023 in regions including Houston, Dallas, Atlanta, China and Thailand, and is planning 22 new restaurants in 2024. The Calabasas Hills, California-based company operates 334 restaurants under the flagship brand and others including North Italia and Flower Child.

Like other full-service operators, the company is ratcheting up development despite lingering pandemic-related business challenges. Those include elevated construction and other pre-opening costs, along with opening delays caused by city permitting backlogs and supply chain disruptions for key equipment such as electrical transformers.

“We are looking to build on this momentum and while the development conditions have not been fully normalized, we are aiming to further accelerate our unit growth,” Cheesecake Factory CEO David Overton told analysts during the company’s quarterly earnings call.