Fashion Institute of Design and Merchandising

Winter 2015

BUMT 4450: Strategic Management Policies

A Strategic Audit of Dine Equity

Table of Contents

Business Model……………………………………………………………………………………3

Components of Value Chain………………………………………………………………………5

Historical Performance…………………………………………………………………………..11

Current Situation………………………………………………………………………………..14

Strategic Managers……………………………………………………………………………...15

External Environment……………………………………………………………………………17

Internal Environment……………………………………………………………………...……..28

Strategic Issues…………………………………………………………………………..……….41

Recommended Strategy…………………………………………………………………….……46

DineEquity Inc 2

Implementation……………………………………………………………………………….….48

Evaluation………………………………………………………………………………………..50

Appendix…………………………………………………………………………………………51

Work Cited…………………………………………………………………………………...…..58

Dine Equity, Inc.

I. Business Model

The Business Model of Dine Equity, Inc. is providing food

services in casual atmospheres to seated patrons or families who

are served by wait staff and pay after eating. This business

model is sustainable by keeping their advertisement, menus, and

technology up-to-date. This industry is saturated with many other

American family restaurants that serve similar dishes at a low

cost. Therefore, the competition is fairly high, making the

business model less sustainable than desired.

Dine Equity Inc., serves the American families and singles

of all ages in the middle class whom typically goes out to dinner

DineEquity Inc 3

once a week, because of the low-cost. Many of these families also

have one or more children, because it is a fast and casual-dining

restaurant it makes it more convenient for those who are on the

go. Under DineEquity Inc., is IHOP, which serves breakfast 24

hours a day, making it accessible and convenient to their

customers ranging from families that go out to breakfast to

singles who are out late at night.

The two flagship concepts are IHOP (International House of

Pancakes) and Applebee’s.

IHOP provides breakfast, lunch, and dinner items at an affordable

price with full restaurant service. IHOP aims to provide fresh,

tasty, comfortable, relaxed, and special memories at the

breakfast table. On the other hand, Applebee’s provides full

service and food at a low price while making it convenient to

their customers by providing Carside to Go.

DineEquity Inc., not only makes money from providing low

cost meals to their consumers, but franchising is their main

source of revenue. Currently, the company is 99% franchise owned

as of October 2012. By franchises, this means they have sold off

all operating Applebee’s, in which they are able to focus on

DineEquity Inc 4

branding, technology, operations, training, and culinary ("Dine

Equity CEO: Pay-at-table Technology”).

Due to franchising, the company is able to focus on internal

factors to differentiate themselves from other restaurants and

create a sustainable competitive advantage. The company

differentiates themselves from other competitors by being honest

and transparent with their customers. According to the CEO, Julia

Stewart, said their competitive advantage is through

technological innovative solutions and social media integration.

Even though, new technology can make a company’s core

competency obsolete or irrelevant, Dine Equity aims to keep up

with their customers by providing them with something new, such

as renovating the Applebee’s inside and out, which makes the

customer stop to wonder what is new and different when they drive

by ("Dine Equity CEO: Pay-at-table Technology”). Through social

media integration, Julia Stewart stated, both brands are

constantly being tweeted every ten seconds, by growing their

social media relationship with their customers they created Pay-

at-Table technology where customers are able to use a tablet to

order and pay for the meals ("DineEquity CEO: Pay-at-table

DineEquity Inc 5

Technology”). The company is keeping up with the times to relate

to current trends today.

Not only do they focus on technological innovation, they

have also found it important to redesign the menu to make it more

appealing and modern to the customers’ eyes. They also aim to

continuously introduce fresh and innovative dishes for their

customers to enjoy. Applebee’s Carside to Go service

differentiates them from their competitors along with their

Weight Watchers agreement, by enabling the restaurant to cater to

those preferring less-caloric alternatives ("Applebee's There's

No Place like the Neighborhood”). Also, the company has created

products for customers to make similar breakfast meals at home by

selling IHOP at Home. These products include frozen breakfast

sandwiches, breakfast bowls, french toast, and syrup. These items

can be found in local grocery stores at the consumers’

convenience ("Offers | IHOP at Home").

The company provides its service by creating healthy meals

and quality service in both flagship restaurants. Since, they are

both casual dining, they provide service by greeting customers,

taking orders, and delivering the meals to their table. A great

DineEquity Inc 6

example of a differentiation for Applebee’s is Carside to Go.

Carside to Go began in 2004, Applebee’s understood the demand for

speed and convenience by having parking spots reserved closest to

the door for servers to personally deliver the customer’s take-

out food straight to their car. IHOP provides the same service,

but instead of Carside to Go, IHOP is opened 24 hours to serve

breakfast day and night.

II. Components of Value

The components of the value chain of Dine Equity, Inc. has

created a cross-functional team. The team includes multiple

functions which includes key relationship points such as

supplier/distributor, product development, testing of products

and services, support for promotions and limited-time offers,

support menu operations, and services. To look at it in a bigger

picture all the key relationships points are within the listed

departments, quality assurance, menu development, marketing,

operations, finance, legal, procurement, and logistics ("Adding

Value through Process Mapping”). Quality assurance and

information technology are used by both brands a long with

DineEquity Inc 7

purchasing co-op. After Dine Equity, Inc. acquired Applebee’s

they found that 76% of the products at IHOP were from the same

manufacturer that Applebee’s was using ("How Dine Equity's CEO Is

Transforming IHOP and Applebee's”). From there the company began

purchasing co-op to save cost for them and their customers.

The cross-functional involvement helps to ensure that

suppliers, facilities, and the products are approved by the

brands ("Adding Value through Process Mapping”). The quality

assurance and menu development team is very much involved in

approving suppliers, facilities, and products to ensure a better

outcome as a team with the help of the CSCS. By being able to map

the value chains, the quality assurance department could’ve been

insufficient due to the limited capacity. This will help to

prevent any loss among the stakeholders. This will also help with

organizing a better process for the value chain to flow

efficiently. As stated above the current value chain today is to

mainly focus on their internal core competencies to continuously

provide newness for their customers. Most of their capital is

currently coming from their franchises, which gives the company a

steady cash flow.

DineEquity Inc 8

The primary activities first begin with supplier/distributor

by purchasing the produce and fresh meat in order to make a new

dish. Second, primary activity is product development or menu

development. By using the produce from the suppliers the company

must create a new dish that customers will love and find

appealing in order to stay on the menu. Third primary activity is

testing of products and services, quality assurance is an

important factor, because it is the last step in sending the

final product out. Especially in the food industry, food must be

tested to prevent any illness or errors. Fourth activity is the

support for promotions and limited-time offers, this includes

advertising, promotion, pricing, and channel relations. By

purchasing co-op, the company is able to save on cost in order

for their customers to save as well. As a result of low cost

dishes, this enables consumers to afford and enjoy casual dining.

Fifth primary activity is supporting menu operations and

services. This is the final activity in delivering the final

product to the consumer. The services provided by the company,

encourages consumers to buy and try the new products on the menu.

The servers are the main support for the menu, by word of mouth

DineEquity Inc 9

and recommendations.

The secondary activities include, procurement, information

technology, research and development, human resource management,

and firm infrastructure. The Centralized Supply Chain Services

LLC, CSCS, is an independent company owned by its members, which

include Applebee’s and IHOP franchisee and company restaurant

operators ("Adding Value through Process Mapping”). The CSCS is

responsible for negotiating all purchasing agreements and

distribution arrangements. Not only do they have to negotiate on

purchasing agreements, they also reward vendors with a positive

partnership ("Adding Value through Process Mapping”).

Next, information technology is needed in every corporation.

They are involved in keeping the data in one place and helps the

employees work efficiently and resolve any problems or technical

difficulties. The department provides ongoing systems support and

advanced troubleshooting, translating business requirements into

detail function and/or technical specifications, and project

plans. The IT department also performs system administration

functions, including system and user account administration and

application security in order for the company to work efficiently

DineEquity Inc 10

on the day-to-day basis ("DineEquity, Inc. - Brands").

Third secondary activity is research and development. The

R&D team is responsible for finding new innovations and

developments to undergo product development. The R&D does develop

new products, but they usually remain in proto stages. They are

responsible in testing new developments in order to pass it on to

the product development department. Bigger corporations have R&D

teams to keep ahead of the competition, by researching the market

or industry ("DineEquity, Inc. - Brands").

Every company has a human resource management team to seek

new hires and finding the right people for the right position.

They are responsible in providing the correct job description for

new hires to be certain of what the job entitles. Human resource

management manages competitive pay, medical and dental insurance,

disability coverage for any employee who are in need of these

benefits. They organize Employee Assistance Programs for those

who need help with life’s challenges and planning for the future

to keep things moving afloat.

Lastly, the secondary activity is firm infrastructure, which

includes accounting, finance, and strategic planning. This

DineEquity Inc 11

activity communicates regularly with all departments,

franchisees, franchise mangers, and outside counsel on franchise

legal matters. Within these activities there are many different

positions to keep the value chain organized and informed of all

processes. Accounting and finance is responsible for financial

and any technical tax leadership. They also provide insights,

identify trends, model scenarios, and identify risks and

opportunities for the enterprise. They also resolve any tax

controversy arising from audits, by leading cross-functional team

projects.

As a result of analyzing DineEquity’s value chain, their

core competency is franchising and product development.

Franchising is the company’s biggest source of revenue. The

company was able to analyze and sell off the majority of

Applebee’s. In which, we can find an Applebee’s and IHOP on every

corner in a neighborhood anywhere in the United States. The

company continues to expand to the Middle East. In order to

achieve successful franchising, the company has a team to analyze

and research any franchising development. By doing so, they

analyze demographic maps, various reports, market demand maps,

DineEquity Inc 12

and market analysis data to propose new franchise locations and

pipeline development ("DineEquity, Inc. - Brands"). As a result

of analyzing and researching data, they are able to expand in

many different locations and also use the information received to

understand what their customers and partners need and want.

Due to the main focus of the corporation, the value chain

should remain the way it is as it is functioning efficiently and

effectively. Every department within the value chain has a goal

and purpose that trickles down to the final product that is

delivered to the customer. As the CEO has stated before, as the

result of selling off the majority of Applebee’s restaurants they

are able to use that money to reinvest within the company to

focus more on improving their supply chain departments, by

researching and developing innovation and newness for their

customers and franchisee.

DineEquity Inc 13

("Adding Value through Process Mapping”)

To analyze the Process Mapping above from CSCS, this

represents how the company should be approving

suppliers/distributers. As stated above, CSCS negotiates with

suppliers/distributers to get a decent cost for the company,

while maintaining a positive relationship with suppliers. On the

left, we see IHOP, Applebee’s Dine Equity, and CSCS when they

find a supplier/distributer they must initiate an approval

DineEquity Inc 14

process to approve the suppliers, next they notify every

department if they intend to approve the contract, the last step

is to implement a quality assurance process to approve the

supplier/distributer. By implementing these steps, it helps to

protect the company by approving the negotiated contract and QA

supports why they should approve a supplier/distributer.

Once they have notified other entities of their desire to

contract with a supplier/distributer, CSCS engages supplier in

the approval process, while QA initiates their approval process.

CSCS engages the supplier by analyzing their financials, their

capabilities, and pricing. Whereas, the QA approval process, they

begin testing, conduct a 3rd party audit review, QA on-site

inspection, and supplier quality program. The company wants to

ensure they are working with ethical and responsible

suppliers/distributers as many of their products are sold

worldwide. Lastly, after all these tests are being done both CSCS

and QA will document all the reports and decide on their approval

to sign the contract with the supplier. This is how CSCS analyzed

the company’s value chain in order to avoid any stress in the QA

department or process.

DineEquity Inc 15

III. Historical Performance

Market Share:

Dine Equity’s market share has decreased over the last five

years. This has been a result of the growth in the casual and

fast casual dining industry since 2008. The market has become

much more saturated; in fact, from 2011 to 2014 the number of

restaurants in the United States increased by roughly 25,000.

However, it is still one of the top performing companies in the

casual restaurant industry. In addition, it is still responsible

for bringing in 12% of revenue among it’s top competitors.

Revenue:

DineEquity Inc 16

Dine Equity’s revenue has seen a decline over the past five

years, but a decline in revenue has been an industry trend over

this time period as well. The casual restaurant industry has

been experiencing a decline as a whole as consumers have

experienced a reduction in purchasing power and fast casual

dining restaurants are becoming more popular. Restaurants such

as Chipotle, Panda Express, and Panera Bread are drawing in more

consumers, and taking away from traditional casual dining

restaurants. These eateries allow customers to quickly customize

meals that can be eaten inside the restaurant but are also

convenient to go. In today’s increasingly fast-paced society,

this type of dining has become highly favorable. In addition,

DineEquity’s decline in revenue can further be explained by its

increase in franchises. About 99% of the company’s restaurants

are now franchised.

DineEquity Inc 17

Stock Price:

Despite the fact that Dine Equity’s market share and revenue

decreased over the last five years, the corporation’s stock price

has steadily risen. While its revenue has decreased due to

growth of fast casual dining and an increase in franchise

restaurants, the company’s net profit has increased along with

cost strategies and debt reduction. For example, DineEquity

reduced it’s debt by over $1 billion from 2007 to year-end 2013,

and reduced G&A expenses by over 25 percent during this time.

This shows that investors place a high value on the corporation,

and it is a top competitor in its industry.

DineEquity Inc 18

IV. Current Situation

A. Current Performance

Good financials, price/earnings ratio positive, high debt

load.

Still showing profit

Paid dividends of 0.75 per share each quarter

Long term debt at the end of 2nd quarter totaled to $1,275.7

million

B. Strategic Posture

DineEquity Inc 19

1. Mission

To unite great franchisees, iconic brands and team members

to create the world’s leading restaurant company-one guest

at a time. To achieve this mission, our strategies are

designed to ensure strong brands; drive profitable organic

growth; identify and exploit complementary concepts and

extensions; and create and monetize new value-added

services.

2. Objectives

“Remodel restaurants with near completion goal in 2014.”

“Open between 33 and 38 new Applebee’s franchises in 2014.”

“Develop between 55 and 60 new IHOP restaurants in 2014.”

3. Strategies

Broaden the reach of Applebee’s and IHOP by expanding

internationally and developing incremental franchised

location.

Adapt and transform itself in order to drive both consistent

and sustainable positive same-restaurant sales and traffic.

Reduce costs for both the company and its franchisees.

4. Policies

DineEquity Inc 20

Consistently provide great service and good quality food at

affordable prices to all consumers.

Use ethical business practices in order to increase

shareholder value.

Offer exceptional benefits to employees accept and support

diversity in the workplace.

V. Strategic Managers

A. Board of Directors

1. Responsible for aligning vision, mission and operations.

2. Ten total members

Include

CEO

Lead director

8 directors

3. Most on board from late 80’s/early 90’s and a few from

mid 2000’s and on

4. Good mix of experience

5. Most have extensive business backgrounds

6. Majority of members have held former chief

DineEquity Inc 21

operating/executive officer roles

7. Two members are investors

8. One member has international business and tax experience

9. Majority of members hold other leadership roles within

other companies.

B. Top Management

1. Responsible for current situations such as: good

financials, positive price to earnings ratio, and a high

debt load. Their current performance still shows a profit,

and is paying dividends of .75 per share each quarter.

2. Eight members

4. Julia (CEO) also part of the Management’s team

5. Members fairly new

6. Oldest appointed in 2008 newest appointed in 2014, the

rest appointed in between those years.

7. Good mix of experience and talents

8. Extensive global business experience with high profile

brands

9. Most come from an entertainment/hospitality background

DineEquity Inc 22

and few from food service

VI. External Environment

A. Natural environment

1. Global warming is causing the climate to change, further

affecting the crops and livestock supply levels, which

can affect the supply chain of Dine Equity.

2. Crops affected by Increased carbon dioxide levels

3. Droughts affect pasture and feed supplies for livestock

4. Livestock also threatened by climate, especially from

resulting heat waves.

5. Food accessibility may be threatened due to affected

supply.

6. International changes in agriculture and food supply are

likely to affect food prices for the restaurant industry.

B. Societal Environments

1. Economic

a. According to the National Restaurant Association, the

increase in jobs within the restaurant industry

DineEquity Inc 23

continues to be a driving force to strengthening the

economy. (O)

This is an opportunity because the restaurant industry

ultimately supports the economy by providing jobs

throughout their supply chain; from farmers who sell

them crops and livestock to the waiters and cooks who

get a paycheck and can turn around and spend on other

commodities further strengthening the economy as a

whole. The stronger the economy, the more spending

power households will have which will result in more

frequent visits to restaurants.

b. Lower gas prices resulted in more spending money

towards restaurants, according to the US census bureau

“eating-and-drinking-place sales totaled $49.6 billion

on a seasonally-adjusted basis in December, the eighth

consecutive monthly increase and strongest volume on

record”. (O) This is an opportunity because many

households, especially those who may be tight on money

are able to save extra money they can put aside and use

DineEquity Inc 24

as disposable income, based off statistics, this extra

money saved at the pump is being used towards eating

out.

c. Issues in regards to wages threaten the overall prices

of restaurant menu items (T)

This is a threat, because without higher wages, many

workers remain under the poverty line which has

negative effects on the economy; Increasing wages would

ultimately increase business costs that would end up

being reflected on the prices, further discouraging

people looking for an affordable meal. This in a sense

would put the economy in the same (or worse) spot since

the inflation of menu item prices resulting from a

raise in wages could ultimately cause a drop in demand

for restaurants. The following statistics have been

gathered to support current wages for the average Dine

Equity server and waiter.

According to glassdoor.com a server at Applebee’s

earns an average of 4.22 an hour in the United

DineEquity Inc 25

States (from a $2 Min to $11 max), which makes it an

opportunity for Dine Equity to hire more employee if

they need to as servers rely mainly on tips. This

also gives servers the opportunity to work harder to

achieve the amount of tips they want to receive by

bringing quality service to the table.

Waiters average $5.03 an hour

Server at IHOP averages 4.30 hr. (from $2 min to $11

max), again this is an opportunity as it gives the

company the ability to hire more people in different

locations.

Waiter averages $5.02 an hour

2. Technological

a. Technology is improving efficiency in the kitchen. (O)

This is an opportunity because many restaurants are

implementing the use of tablets in their kitchens to

store recipes and have quick easy access, having these

databases also ensures that the quality of a specific

meal will remain in tact and taste the same every time.

DineEquity Inc 26

Using tablets in the kitchen is also helpful to keeping

track and controlling expenses.

b. Use of mobile table devices is growing. (O)

This is an opportunity because mobile table devices are

able to illustrate a meal in a way that a simple paper

menu cannot. By displaying the menus on a table device,

the customer has the opportunity to view the food item

in a three dimensional way and companies have the

opportunity to add descriptions that may include food

origin further connecting with the customers values and

senses.

c. Online reservation and order methods on the rise (O)

This is an opportunity because these methods improve

efficiency and experience; both methods cut time out

and allow the individual to show up at the restaurant

and be seated immediately without having to wait.

Having online ordering also adds value for the customer

since it gives them more options for dining in or

DineEquity Inc 27

taking out.

d. Online Reservation and order methods on the rise. (T)

This also creates a threat because it takes away from

the entire dining in experience; which is essentially

what keeps customers returning. A customer then would

be able to recommend the restaurant to friends and

family based on the service provided via the take out

process, which for first timers could really discourage

return if the service is bad the first time.

e. Table ordering devices used create Opportunities (O)

Applebee’s has installed Intel-backed presto tablets to

their tables in attempt to “build on to the experience

for the guest” (Forbes). These Tablets improve

efficiency and speed when getting food to the table and

getting the customer checked out and out the door,

which ultimately creates value for the consumer since

time is always an issue when dealing with placing

DineEquity Inc 28

orders and waiting to pay.

A big concern with installing tablets is the cutting

out of human interaction and job replacement,“Very clearly,

our intention is not to replace servers, who provide a personal connection

that is invaluable in our restaurants and to our ‘See You Tomorrow’

experience,” Archer says. “This is about building on to the experience for

the guest, not saving on labor (Forbes) ”. These tablets will

also be used as a mean to generate revenue in the

future; DineEquity hopes to install music and offer

game apps so families can distract smaller children for

a small fee.

f. “Older consumers won't want to bother with the iPad

(USA today).” (T)

Adding too much technology can become a threat to older

consumers since they may or not may not be too familiar

with technology such as the iPad.

3. Political-legal

a. Public Health Acts pushed by the government

DineEquity Inc 29

With obesity on the rise, acts such as, the Nutritional

Labeling and Education act are being implemented in

regards to nutritional labeling which present both

opportunities and threats.

(O) The opportunity exists in making it easier for the

health conscious consumer to make better decisions in

regards to their food choices; this creates more

convenience for the consumer and helps in avoiding

health problems due to things such as allergic

reactions or too much sodium or saturated fat intake,

which lead to high blood pressure and other illnesses.

(T) The threat is associated with having to track the

amount of calories and every single ingredient, which

exists in consumers becoming paranoid of health issues

and choosing to stay away from specific menu items. At

that point the restaurant would have to make changes

for, example switching out fried for baked or switching

out the use of high saturated fats for cooking and

DineEquity Inc 30

switching to polyunsaturated fats such as olive oil,

which would also call for an increase in costs.

b. Minimum Wage Hikes (T)

This is a threat (as previously mentioned) because

raising minimum wages for restaurant/food service

workers can affect overall costs and food prices since

food suppliers are likely to hike prices as well due to

having to cover extra wage increase costs.

c. NAFTA (O)

This is an opportunity because NAFTA increases trade

flows since it lowers trade barriers. Members within

the Restaurant Industry in the united states have more

options and more bargaining power in regards to their

supplies when they are obtaining them from either

Canada or Mexico and have the incentive of free trade

which lowers overall bottom line cost. Participating in

trade within neighboring countries also improves speed

of delivery and food or product quality and freshness

since products have to travel a shorter distance.

DineEquity Inc 31

4. Socio-cultural

a. Increased interest in supporting sustainability (O)

This is an opportunity since it allows the restaurant

industry to focus on ways to become more sustainable

which reflects positively on overall band image.

Restaurants who practice sustainability are not only

doing something good for their image but also for the

well being of the world we live in. “Recycling has

become business as usual for 65% of restaurant

operators. Approximately 74% of operators said they

use a back-of-house recycling program, while 43% said

they use a program in the front of the house.

Customers approve. About 60% said they prefer to

patronize restaurants that recycle, with 51% saying

they are willing to pay an average of 10% more at

restaurants that do recycle” (restaurant.org).

b. Consumers are more health conscious and show increased

interest in healthy menus (O)

DineEquity Inc 32

This is an opportunity because it allows for

Restaurants such as those under dine equity to provide

more offerings and variety to their customers. IHOP

currently has a healthy eating section in their menu

while Applebee’s has an under 600-calorie menu, both

restaurants also disclose ingredients and allergen

info.

c. Consumers look for higher value and ways to save (O)

This is an opportunity because it allows restaurants

to reach a wider set of customers by offering value

items such as Apple bees two for $25 menu and IHOP’S

senior menu. It’s essentially the value and quality as

well as experience that will continue to drive much of

the business.

d. Dine Equity is on top of trends constantly introducing

new menu items to support customer-changing

preferences (O) This presents an opportunity, because

it allows the restaurant to experiment with popular

DineEquity Inc 33

dishes and make them contemporary and adding twists

further creating favorite dishes that ensure customers

keep going back. The true value is added when a

flavorful dish becomes more health-conscious,

customers appreciate having a section on both IHOP and

Applebee’s menu that supports their need for

alternatives.

C. Task Environments

a. Rivalry- high threat

Casual dining restaurants compete with other food

establishments ranging from Mom and Pop sized to large

chains. The restaurant industry continues to indicate

patterns of a growing industry “eating and drinking

places are projected to add jobs at a 2.8 percent rate

in 2014, which will represent the 15th consecutive year

in which industry job growth outpaced the overall

economy (National Restaurant Association)”. This

presents a high threat, because it shows the industry

is doing well and encourages competition. The better

DineEquity Inc 34

an industry performs the more appealing and

competitive it becomes. The need to further

differentiate menu items and overall experience

offered is vital to Dine Equity’s future success.

b. Threat of entrants-Medium threat

The biggest barrier to entering the restaurant

industry is the amount of investment needed. To start

a new restaurant requires larger capital to buy

equipment and the owners have to overcome with

competing customer loyalty as well as rules and

regulations as set by the government. Franchising

allows entry into the industry to be fairly easy as

long as the capital investment is readily available.

Because of the ease of franchising, other restaurant

chains have the opportunity to franchise and cause

more competition to Dine Equity brands based on

location proximity. Smaller sized Mom and Pop food

establishments (given that enough capital is

available) may also enter and compete with larger

DineEquity Inc 35

chains such as Applebee’s or IHOP by offering

“authentic” culture dishes that attract more

customers.

c. Supplier power: Low Treat

There are many substitutes to where a restaurant

can obtain their food/supplies from, food is

generally priced about the same so if for example

one specific food group was to raise in price, the

whole industry for that food group would follow.

Dine equity developed Centralized Supply Chain

Services LLC as the sole purchasing agent for

Applebee’s and IHOP systems. CSCS plays a role in

making sure that Dine equity continuously receives

adequate quantities at the lowest sustainable

delivery prices and supports their efforts in

developing new and innovative products. According

to CSCSCOOP.com dine equity purchases about:

95 million pounds of chicken

78 million pounds of soy oil

DineEquity Inc 36

70.4 million pounds of beef

57 million pounds of pork

30 million pounds of cheese

22 million gallons of soft drinks

Since DineEquity uses CSCS as the sole purchasing agent

and has control over dictating and developing quality

standards as well as approving and disapproving

suppliers and distributors. They have high control over

their supply chain, further lowering the risk associated

with dealing with supplier power.

d. Buyer power: High Threat

Customers are more sophisticated and have access to

menu’s and reviews from virtually every restaurant.

Customers have the power to look for more value and

lower prices in other restaurants that may offer near

the same quality of service and food.

e. Threat of substitutes: High threat

High threat of substitutes exists for restaurants

DineEquity Inc 37

since they all essentially offer the same items such

as drinks, steaks, burgers and similar appetizers and

breakfast foods. The only thing that really limits the

scope of substitutes is specialty items offered that

another restaurant is not be able to make as

successfully. Our client offers items such as the

quesadilla burger at Applebee’s and the Criss-

croissants at IHOP; which other restaurants do not

offer and can easily be substituted with other menu

items from other restaurants.

f. Consumer interest in Technology: Low Threat

Consumers keep up with the latest technology, as more

and more technology is incorporated into the

restaurant industry, Dine Equity will be keeping up,

further encouraging customers to return to their

restaurants and experience ease of service with their

Intel backed tablets that allow them faster ordering,

faster check out and three dimensional menu items.

Future tablet plans include apps for kid games to keep

DineEquity Inc 38

them happier and “less distractive” and will be hooked

to I tunes to provide each table their own jukebox.

Technology for dine equity poses a low thereat since

they are actively trying to keep up with the rate of

technological growth.

g. Health and Nutrition awareness increasing: Medium

Threat

With consumers becoming more and more health

conscious, Dine Equity’s menus do not offer as much

variety for the consumer. Someone who is looking for a

healthy mean may be more encouraged to attend places

such as “natural Café” or even other restaurant chains

that offer more variety. This places a medium threat

since it encourages customers to look for substitutes.

h. Overall the task environment within the restaurant

industry is very competitive, it takes excellent

service and food to really make a customer a regular

or to prefer a specific food establishment over

DineEquity Inc 39

another. Because of the threat of substitutes and the

competitive landscape that the restaurant industry

operates in, it is ultimately up to each restaurant to

provide a well diversified menu and a complete

experience to really position themselves in the minds

of the consumer.

VII. Internal Environment

A. Corporate Structure

1. Their structure is organized to provide the best value of

their franchisees and stockholders. With strategic

leadership and a strong vision for their franchisees they

create a dedicated focus that allows Dine Equity to have a

strong brand revitalization and franchisee expertise. All

the goals, strategy, polices are monitored for the

performance of the board, CEO and align with the main

objectives of the company to increase value. (S)

2. The business and affairs of the company are handled and

managed under the board of directors. (S)

DineEquity Inc 40

a. The board of directors is main group to handle

decisions. The board generally would be no less than 7

and no more than 12 directors to incorporate diversity

without hindering effective decision.

b. The goals of the board are to build value for the

company’s stockholders and to assure vitality for its

customers, employees and others that depend on the

company.

3. The company publishes their proxy and other communications

on their website that interested parties can communicate

with the directors. (S)

B. Corporate Culture

1. DineEquity has a strong responsibility to drive shareholder

value through ethical business practices. They also broaden

their vision to be a force for social force. Their beliefs

are well-defined and are consistent among many branches of

the company. (S)

2. The consistent objective with the company is to build value.

(S) This is consistent with their culture. Within the

DineEquity Inc 41

neighborhoods in which they operate, the employees and the

environment their objectives, values and practices are

consistent to benefit others.

3. DineEquity complies with the applicable laws and regulations

and promotes compliance among their suppliers. In the

buildings they operate their restaurants they seek

improvements on supply, design, build and maintain their

facilities. Most IHOP adopted Green Initiatives in 2010 that

include plumbing, energy saving products and many more. (S)

4. Their other main issues are within packaging and treatment

to animals. They use many paper and plastic packaging

products and seek vendors that use recycled content, inks

and dyes used that are sustainable to forestry. They also

support the welfare of farm animals and support Dr. Jeffrey

Armstrong of the Michigan State University College of

Agriculture and Natural Resources to provide scientific

guidance. (S)

5. DineEquity encourages, values and recognizes the diversity

in their workforce. (S) They understand and embrace the

differences such as race, gender, age, religion, culture,

DineEquity Inc 42

ethnicity, sexual orientation, veteran status, national

origin or physical ability. Not only do they embrace it but

they understand that the array of backgrounds can only lead

to benefits of the firm. “Our employees are integral to our

success.”(DineEquity, Inc.)

6. They support the neighborhoods in which they do business by

supporting programs for children and improve education. (S)

C. Corporate Resources

1. Marketing

a. DineEquity strives to improve their marketing

techniques to promote brand awareness to IHOP and

Applebees. They strive on providing products at the

right price for their customer base in a friendly

settings.(S)

i. The marketing objectives are more implied based on

their print and TV advertising and brief

statements on their company objective statements

on their website. (S)

ii. DineEquity’s objectives and values consistently

DineEquity Inc 43

align with improving value for individuals that

are associated with their company. Therefore

having marketing objectives that seek to strive

and improve the brands that are associated with

DineEquity is consistent with their mission.

b. DineEquity has restaurants, IHOP and Applebees that are

long standing chains of casual dining. They provide

customers with comfort American food with a casual

atmosphere at prices they can afford. They spread these

factors domestically and internationally providing a

warm dining experience. The market is large competing

with other dining establishments. Customers can expect

the value and atmosphere when dining at either

establishment. The restaurants are predominantly in the

United States and a handful in other developed

countries. (S)

i. When the brands introduce unusual items, they tend

not to go well with the customer base who come to

the establishments for comfort food. However, when

they provide variations to staple items they will

DineEquity Inc 44

consistently be popular and liked among customers.

(W)

ii. These trends affect performance of how the menus

will be developed and change. In order to stay

ahead of competition they have to introduce new

and enticing attractions that will draw in new

customers and keep their regulars.

iii. They have had some hiccups in the past, failing to

meet new developments that customers were

expecting and the analysis has provided the

company to change their strategies. Applebees is

leaning towards a younger vibe and IHOP is keeping

their roots intact. (W)

iv. They put most of their marketing efforts in TV

spots to reach their target market which are

middle class families. These commercials keep a

constant reminder in people’s minds that it is

always a place they can go for American comfort

food. (S)

c. Their marketing performance has to be relevant to stay

DineEquity Inc 45

competitive in the market of American casual eateries.

They do well to have commercials that are colorful,

warm and inviting. (S)

d. Their marketing strategies aren’t revolutionary.

(W)They are typical in terms of TV spots, print ads in

family magazines, mail coupons, email blasts etc. These

concepts are accepted and familiar for their target

market. They are well enough that they will reach their

customers well. Applebee’s has an email club and IHOP

has a personalized feature on their website called “My

IHOP” that provides customers with a more in depth

experience.

e. Their international concepts are more of the same. They

provide an American style dining experience and perhaps

pull back but in countries like Canada where the

lifestyle is similar to America, these establishments

do well. (S)(W)

f. They are aware of their carbon foot print and in terms

of marketing they choose materials that are recyclable

or use recycled materials if it consists of a physical

DineEquity Inc 46

product. (S)

g. The marketing manager oversees the marketing process

and determines if it aligns with the company’s values,

missions and objectives. The marketing manager

determines if the campaign needs to be adjusted in any

way.

DineEquity Inc 47

2. Finance

a. The above table compares DineEquity to its two top

competitors, Brinker Restaurants and Denny’s

Corporation. They have similar customer bases and

perform similarly on different levels. Brinker has

1.50

DineEquity Inc 48

higher total revenue however their ratios are

comparable to DineEquity. After 2012, where the brand

transformed the system of their restaurants and had

several franchises, DineEquity saw improvement in the

ratios for the better. It is most apparent in their

current ratio. In 2012, when they were seeking a change

it was at 1.06 and this past year it has increased to

1.22. This shows the brand is growing and developing

into their new systems.(S)

b. After 2012, ratios resulted in a drop or a rise. Since

2013 the ratios are progressing in the right direction

and the brand is seeking improvement in their

establishments. (S)

c. Compared to the other brands, they have a consistent

increase after 2012. Brinker tends to fluctuate between

high and low ratios which show instability within the

company operations. The fluctuation is apparent in the

current ratio for both Denny’s and Brinker. Brinker

resulted in a drop and Denny’s a peak in 2013. (S)

d. “The Company has successfully transformed its IHOP

DineEquity Inc 49

restaurant system into one that is 99% franchised and,

as of October of 2012, has achieved that goal with

Applebee’s as well. DineEquity has refranchised a

substantial majority of Applebee’s company-operated

restaurants and expects to realize significant cost

savings as a result.”(DineEquity, Inc.)

i. It is consistent with building value in the

company and expanding the value for their

customers, employees, franchisees and investors.

ii. Trends that emerge are that the company underwent

some development within their brands that caused a

significant decrease across the board. Especially

from 2011 to 2012. However, in the ratios many

show an increase. (S)

iii. It is apparent in the company that in 2012

DineEquity underwent a change within their brand

Applebee’s which provided an increase over the

last couple years. (S) IHOP saw a decrease in

sales over the years which set them back. In terms

of future performance, the analysis shows a slight

DineEquity Inc 50

increase and it might continue depending on how

well the restaurants and franchisees perform. (W)

iv. Their strategies are as followed: “Optimize

organization capability;

Drive profitable organic growth; and Reduce costs

for both ourselves and our franchisees.”

(DineEquity, Inc.) (S)

v. These establishments that are under DineEquity are

popular, household names. These aspects provide

them with a competitive advantage while their

financials keep them afloat. (W)

e. DineEquity’s financial managers take steps to better

their company such as leveraging resources to build

value, lowering interest rates on borrowers, raising

standards in synergy and efficiency and enhancing

collaboration within franchisees. (S)

f. The company accepts skilled franchisees in

international regions who are experienced with owning

restaurants and have suitable knowledge of the external

environment of the country it is in. (S)

DineEquity Inc 51

g. There are issues globally and domestically those they

cannot control and can result in a dive in sales. The

profitability of these sales can also decrease for the

franchisees if any crisis happens. (W)

h. The financial manager is responsible for overseeing the

strategic management process, offering advice and

expertise in the field of finance and support the

management team in making decisions.

3. Research and Development (R&D)

a. The corporation’s current R&D objectives include menu

innovation and restaurant remodels. (S) Other than that

they do not financially invest in other research and

development. (W)

i. These objectives are clearly stated in

DineEquity’s annual report.

ii. Based on their mission to build value within their

brands and clients, the research and development

objectives are consistent with the mission. (S)

iii. They use technology in the kitchen of the

establishments to create an efficient work flow,

DineEquity Inc 52

mobile ordering services, and other online

developments. (S)

iv. Research needed for these improvements are not

experimental where engineering is needed, however

basic and applied research are useful.

Understanding the clientele and competitive menus

and product developments of other companies are

main research objectives.

b. In these times to improve aspects, some are held

constant therefore there may be some discontinuity.

Another form of discontinuity is the selection of

establishments that seek the improvements. It gives an

unbalanced experience if a customer was to visit

multiple locations and receive different menus or

objectives. (W)

c. DineEquity is in line with their competitors on R&D

development. Other competition like Ruby Tuesday and

Denny’s seek new menu items and restaurant redesign to

freshen up the experience. Healthy menu items are also

being featured on many different restaurant menus that

DineEquity Inc 53

add a competitive edge. (S)

d. The brand prefers to use materials that are made from

recycled products and are using sustainable systems in

the development of the improvements. They also

regularly recycle used cooking oil in their facilities.

(S)

e. The R&D manager provides insight in the research and

development aspect in the strategic management process.

They also work with the management team in evaluation

of decisions and strategies. (S)

4. Operations and Logistics

a. DineEquity’s objective for operations is to stay

innovative through menu selection, specialized days for

dining and efficient service. (S)

b. “In February 2009, Centralized Supply Chain Services,

LLC (“CSCS” or the “Co-op”), an independent cooperative

entity, was formed by us and franchisees of Applebee's

and IHOP domestic restaurants who have chosen to join

the Co-op. CSCS has been appointed as the sole

authorized purchasing organization and purchasing agent

DineEquity Inc 54

for goods, equipment and distribution services for

Applebee's and IHOP restaurants in the United States.

We (as operator of 36 company restaurants) are a member

of CSCS and have committed to purchase substantially

all goods, equipment and distribution services for

company-operated restaurants through the CSCS supply

chain program. As of December 31, 2013, 100% of

Applebee's franchise restaurants and 99% of IHOP

franchise restaurants were members of CSCS.”

(DineEquity, Inc.) (S)(W) DineEquity does not control

CSCS although they have rights complied with them.

c. They compete with other restaurants for ideal locations

that fit their market, make their customers feel

comfortable and are accessible. (S)(W)

5. Human Resource Management

a. Current HRM objectives, strategies, policies, and

programs. (S)(W)

DineEquity currently has no specific HRM objectives or

strategies clearly stated.

Has programs to attract, retain, and engage employees

DineEquity Inc 55

Workforce programs such as tuition reimbursement

Benefit packages including competitive salary, medical,

dental, vision, 401(k) life insurance, and domestic

partner benefits

No employee unions

Good relations with its employees.

Applebee’s Heidi Fund to provide financial assistance

to employees at company-owned restaurants who are in a

financial crisis

b. HRM performance in individual employee and job fit

Over 2500 employees in 2013 year end, 500 were full-

time, non restaurant, corporate personnel (S)

c. HRM performance compared to similar corporations (S)(W)

Good work/life balance

Positive workplace culture

Low wages and poor customer tips

d. Concepts and techniques to evaluate and improve

corporate performance

Unexpected corporate visits to restaurant locations to

evaluate performance

DineEquity Inc 56

e. Workplace diversity/human rights (S)

Embraces diversity

Sees the benefits in having employees that differ in

race, gender, religion, culture, ethnicity, sexual

orientation, veteran status, national origin and

physical ability

Respects individual differences

f. International compensation/training

Offers specialized training for foreign franchise

employees catering to country culture

Compensation is controlled by franchise owner

g. Role of outsourcing in HRM

h. HRM manager and SMP.

DineEquity’s current Senior Vice President, Human

Resources is John B. Jakubek.

Large focus on cultural integration of Applebee’s,

IHOP, along with DineEquity, ensuring that both units

are consistent with their parent company

Adds strategic leadership in employee relations, talent

acquisition and staffing, retention, executive and

DineEquity Inc 57

organization development, succession planning,

diversity, training and development, compensations and

benefits, and governmental and legal compliance.

6. Information Technology

a. “We utilize programmed point of sale systems, kitchen

data management, and back-of-the house systems for

accounting and inventory management in our company

restaurants.” (DineEquity, Inc.) (S)

b. On a daily basis, sales and product report information

is transmitted to the restaurant support centers. (S)

c. Technology is the key to long-term plans (S)

i. System stability

ii. Targeted innovation

d. The processing of payment and confidential information

hinders security and operational functions that can

result in risks and additional costs. (W)

e. Credit cards and gift cards are accepted as payment in

restaurants. (S)

f. “We submit our systems to regular audit and review, as

required by Payment Card Industry Standards, including

DineEquity Inc 58

periodic scanning of our networks to check for

vulnerability. In addition, we participate in annual

audits of our financial and human resources systems to

verify that measures are in place to protect our

employees' personally identifiable information.”

(DineEquity, Inc.) (S)

g. DineEquity is not responsible for franchisees to

maintain the compliance however they are urged to

follow the same procedures. (W)(S)

D. Summary of Internal Factors

Each factor within the internal environment provides aspects

to the company that allows it to run and work well. Some factors

are more vital than others. In DineEquity’s case, they rely on

their marketing, culture and financial factors. The restaurant

industry is highly competitive therefore having a definitive

culture and mission to base the brands off of is vital. Marketing

is one of their biggest aspects to introduce new customers to

their brands and to remind others to keep returning to the

establishments. Financial factors are vital in every company

DineEquity Inc 59

because they need to understand what areas worked and didn’t each

year. Finances can also measure how new strategies and policies

that took place over the years affected the numbers and if any

aspects should be changed. In the future, along with these

current factors, DineEquity could focus on building more research

and development to push their brands above the others in

competing markets rather than working at their level.

VIII. Strategic Issues

In any business whether its service based business or

retail, customer satisfaction should be the first priority. Their

complaints must be resolved quickly and the company should work

towards finding solutions to avoid same complaints repeated

again. Their business strategy can be defined as providing unique

and compelling content.

Strengths

Business and affairs of the company are handled and managed under

the board of directors- the principal role of the board of

DineEquity Inc 60

directors as representatives of the shareholders, is to oversee

the function of the organization and ensure that it continues to

operate in the best interests of all stakeholders. Given the

complexity of today’s organizations, that is no simple or

straightforward task. Today, board effectiveness is a key

performance driver of the companies. There are a total of 10

members, 8 of them are directors with most of them ranging from

the late 80’s/early 90’s to a few from mid 2000’s. There are 2

investors as members along with 1 experienced in international

business. Majority of them are former chief operating/executive

officers.

Strong responsibility to drive shareholder value through ethical

business practices- Ethical behavior and corporate social

responsibility can bring significant benefits to a business. It

can attract customers to the firm's products, thereby boosting

sales and profits. Make employees want to stay with the business,

reduce labor turnover and therefore increase productivity.

Attract investors and keep the company's share price high,

thereby protecting the business from takeover. Dine Equity’s

DineEquity Inc 61

goals, strategy, polices are monitored in order to provided the

best.

Support the neighborhoods- By supporting locally it embraces what

makes a difference, get better service, promote competition and

diversity, helps out the environment, create and keep jobs, help

out the environment and most of all invest in the community. When

Dine Equity is supporting local they do more just than gaining

customers, they also are helping out children by improving on

education.

Weakness

Restaurants are predominantly in the United States- most of

their locations are in America even with 3,600 opened. With

expansion overseas Applebee’s and IHOP will gain greater

exposure, favorable business climate and rejuvenation. Overseas

expansion increases the exposure to a business, helping

businesses create and execute products. As a result, you'll gain

greater brand recognition throughout the world. This can

facilitate even more expansion in the future. You also can attain

DineEquity Inc 62

greater respect from customers and potential business partners in

the domestic market, as they may now view you as a bigger player

in your industry. In addition to expanding a thriving business,

entering overseas markets can help revive a struggling

enterprise. Businesses operating in a saturated market or

experiencing a shrinking market share can find new outlets for

their products and services in another country. Before DineEquity

can expand oversea, they must fully do research on the markets

they want to enter and fully understand the culture.

Applebee’s is leaning towards a younger demographic and IHOP

is keeping their roots intact. By targeting a limited amount of

customers who will cause low traffic. There are many other

restaurants the customer can choose from, but they will keep

coming back to them for a reason. Both of these flagship concepts

should extend their demographics in order to reach boarder

customers. Give them a reason why your restaurant is the best out

of the best. Teens have the most spending power, if you want more

profit make sure to spend a bit more time on targeting them.

Marketing strategies aren’t revolutionary- they do have the

normal advertising: T.V., print ads, mail coupons, emails, family

DineEquity Inc 63

magazines and etc. Social media has been on the rise and will

continue to be the new way of marketing. They have many social

media platforms, but they are not using it to its full ability.

For instance, they could share some recipes on how to make the

famous IHOP pancake, but without giving away the secret. Or do

giveaways to help promote awareness.

Opportunities

Increased interest in going green- Going green is one of the

most important movements affecting commercial food service

operations today. Going green can be one of the smartest

operational decisions. Not only reduces consumption and draws

environmentally conscious customers, but actually saves money for

the operation in the long run. A simple to way reduce energy

usage and cut down on monthly expenses is to replace conventional

light bulbs with energy-efficient fluorescent lighting. These

bulbs produce less heat and more light, putting the energy

dollars where they count the most. Next would be to purchase

ENERGY STAR® qualified commercial kitchen equipment whenever the

old equipment wears out. With efficient equipment, the operation

will consume less energy and less water without sacrificing

DineEquity Inc 64

quality. In fact, the money the company saves in utility bills is

often enough to recover the cost of the equipment itself.

Consumers are on top of trends and constantly changing their

preferences-the food services sector is constantly evolving, as

restaurants cater to changing consumer preferences, new lifestyle

choices and demographic shifts are becoming a factor. The trend

toward health consciousness, coupled with an increasing interest

in gourmet and high-quality cuisine, is inducing food-service

operators to adopt value-added options, such as gluten-free

foods, farm-to-table restaurant models and locally sourced

produce. To help with the preference change, DineEquity should

offer a survey after their meal to see what changes and

preference they want that is currently not offered. The feedback

will help the restaurant improve its services.

Lower gas prices resulted in more spending money towards

restaurants-people eat out for the experience and social

interaction. Being at a restaurant invites people to interact

with one another in an effective way. People spend all day inside

focusing on work that towards the end of the day, people can

DineEquity Inc 65

relax. Also you can support your local economy. Eating at local

restaurants, even chains that are franchised by locals, is

helpful to the neighborhood by supporting local businesses. When

people have disposable income they want to go somewhere that

gives them an experience to remember without having to spend too

much.

Threats

Wages threaten the overall prices of restaurant menu items –

combined with higher energy costs and rising wholesale prices for

wheat, dairy, meat, and other commodities adds up to already-

tight operating margins. Operators large and small are seeking

ways to offset these wage pressures: reining in costs, hunting

for operational efficiencies, and most significantly, boosting

menu prices as much as their markets. By importing crops from

another country will help cut cost of food prices, but still

trying to maintain the minimum wage.

Online reservation and order methods-people rely too much on

technology. However, as we all know technology fails once in a

while. Online reservations are fast, easy and convenient, but

taking out food excludes the purpose of personal interaction.

DineEquity Inc 66

People want to connect with others and while technology enables

us to do so, it also hinders it in the same way. People can text

or video chat someone, but it cannot replace face-to-face

interaction. Conversations during the meal provide opportunities

for bonding, connecting and learning from each other. Food is a

wonderful way to share and celebrate the diversity of culture and

traditions. Sharing a meal together is one way to influence the

culture. By offering discounts for dining in will attract the

customer to spend more time together instead of taking out.

Older consumers won't want to bother with the iPad

(Usatoday)-the baby boomer generation did not grow up with

technology. When technology was starting to rise, they had little

interest due to the lack of knowledge. People fear change and

they feel like they lost control would rather stay where they are

instead of moving forward. A solution to this when an older

consumer walks in ask them if they want to order with the iPad or

regular ordering. If they chose the iPad offer them guidance on

how to order and what buttons to push.

IX. Recommended Strategy

DineEquity Inc 67

The generic strategy they are currently using the

differentiation strategy because what makes DineEquity unique is

that it offers many selections of specialty food. Applebee’s

concept focuses on casual dinning with mainstream American dishes

such as salads, shrimp, chicken, pasta, and riblets (which is

considered Applebee's signature dish). All Applebee's restaurants

feature a bar area and serve alcoholic beverages (except where

prohibited by law). IHOP focus is on breakfast foods such as

pancakes, omelets, French toast and offers a menu of lunch and

dinner. The corporate strategy they are pursuing now is creating

long-term relationships with their customers. They want to create

these relationships by providing everything the customer needs.

There are many feasible alternative strategies that can be used

for Dine Equity. There are many pros and cons for all three

strategies. The three alternative corporate strategies are

stability, growth, and retrenchment:

Stability: stability means that they do not change anything about

DineEquity Inc 68

the company; they continue to stay the same in the current

activities of the company. This strategy would not be the best

strategy for DineEquity, because their continued growth is

helping them reach more customers, which is generating more of a

profit. The pro of stability is that it is useful in the short

run. The cons of stability are that it is normally used in small

businesses, it can be dangerous in the long run, and it is used

for predicable environments.

Growth: would be the best decision because although they already

have over 3,600 locations. Since the company is 99% franchise

own, they will be able to focus on international growth. Aside

from that technology has played a roll in the expansion of

reaching customers. Between the arrival of mobile devices on the

table, online reservations, social media, and new payment

methods, technology has infiltrated the food and restaurant

industry like never before. Some of the advances will serve to

improve the experience.

Besides replacing menus and possibly those who take your

order from them, tablets have the potential to help hosts deal

DineEquity Inc 69

with incoming patrons who may have reservations. This can be

accomplished through connecting the restaurant’s website to some

form of online reservation system using a service like open table

and then simply using the tablet as a means of checking out who

is scheduled when. This allows the restaurant to maintain their

computerized system. Social networking sites have played a huge

role in shaping the views of society on a myriad of issues, and

they are also playing a role in shaping people’s opinions of

dining establishments. Technology has never been more intuitive

than it is today, and it’s only getting better. It allows

restaurant patrons to find restaurants, rate them, and decide

where they want to spend their hard-earned money when they go out

to eat. It allows restaurant owners to be more efficient and

effective in the areas they feel can be streamlined by hardware

and software. But if used in the wrong place and at the wrong

time, it can do a restaurant great harm as it can with any

industry. With a better understanding of the technology, the

industry has better chance of thriving. And in tough times, those

restaurants who are on the right side of the equation have a

better chance of surviving.

DineEquity Inc 70

This growth strategy can be achieved if the company focusing

on improving their customer service as well as retaining existing

customers. We recommend that this growth be properly planned and

controlled. We recommend a strengthening of the infrastructure

first and then assign additional resources to expansion. We feel

that the growth strategy should focus on horizontal integration.

By applying horizontal integration to Dine Equity eliminates the

threat of competitors and also broadens the reach of acquiring

the competitor’s customers.

Retrenchment: is not a good strategy for this company because

DineEquity is doing well and they do not need to make drastic

changes but there is always room for improvement. The pros and

cons of this strategy would depend on how the company is doing.

X. Implementation

A. Program-Employees DineEquity will implement

stability, growth and retrenchment by starting

with the employees. If current employees don’t

DineEquity Inc 71

meet the standards they will be replaced with

better fitting people for the job. These

employees will be knowledgeable of great

customer service and technology. They will also

be able to adapt to the changes that the company

will make in the long run. Employees need to be

personable and influence customers to come back.

B. Technology- For efficiency purposes the

companies will take orders on tablets. This will

allow consumers to get their food faster which

results in more consumers. Technology will also

be used to get feedback from consumers. If

consumers complete a survey (that can be done

via smartphone) they can get a credit towards

their next visit to the establishment. Social

networks will play a huge role in the businesses

because majority of consumers use social media,

and it’s a great interaction tool to see what

they like and think of the businesses.

DineEquity Inc 72

Budget- The projected costs of the program will

be dependent on each establishment. Some

establishments have amazing employees that don’t

need to be replaced and that leaves the

technology aspect. Majority of the money will be

spent on tablets and training employees to use

them properly and efficiently. Each restaurant

should have a responsible manager to handle the

social media aspect of that particular location.

Tablets range from $200- $800 a piece, based on

how many waiters and traffic of customers will

determine how many each restaurant needs. I

would estimate the need of at least 15 tablets

per restaurant, which could run from $3k to $12k

and another $5k for training the employees.

Policies and Procedures

There will be rules and regulations to who

uses the tablets and how they are dealt with

properly. There will be a docking station where

they are put at the end of the night to charge.

DineEquity Inc 73

At that docking station will be a list of how

to’s on how to care for the tablet.

XI. Evaluation

Dine Equity should use Return on Equity and benchmarking as

a measure of how the strategy is working. ROE (return on equity)

is calculated by dividing net income by total equity.

Benchmarking is a continual process of checking how services are

in comparison to the toughest competitors. The company will also

pay attention to social media feedback and use it as a tool to

improve the overall business..

DineEquity Inc 74

Appendix

Our major findings from the results of our ratio analysis

show that DineEquity’s financial condition is relatively

stable and safe in some areas, but poses a risk to its

financial condition in others. They indicate that the company

exceeds its competition in certain components, but could

greatly benefit from focusing on improvements in others where

it is not as strong. If the corporation is to continue to be

successful in the long run, then it is necessary to target

these issues. Otherwise, the company’s financial condition

may worsen significantly over the next five years.

DineEquity’s current ratio, net profit margin, gross profit

margin, and days in inventory all affect it’s financial

condition positively. Its current ratio, for example, has

increased steadily since 2012, and has remained above 1 over

this time period. This shows that it is able to pay its

short-term obligations. Also it’s net profit margin has been

roughly twice as high as its competitors, at 11.9 percent in

2014, while its gross profit margin has shown an increase

DineEquity Inc 75

since 2012, reaching a high of 57.7 percent in 2014. Both of

these margins show that while the company’s revenue has gone

down over the last five years, it has effectively reduced its

costs to remain profitable. In addition, DineEquity’s days in

inventory ratio is much lower then its competition, showing

that it is faster and more efficient at turning its raw

materials into cash.

The following ratios have a negative affect on DineEquity’s

financial condition: return on investment, average collection

period, debt to asset ratio, and times interest earned. The

corporation’s return on investment was only 3 percent in 2013,

compared to Denny’s 5.3 percent. Because its competitor has a

higher ROI, investors would be more likely to choose to invest

in Denny’s over DineEquity. The company’s average collection

period has increased over the past three years, and is higher

than some of its competition. Having a higher average

collection period subjects the corporation to higher financial

risks. DineEquity’s debt to asset ratio has stayed within 55

percent over the past three years, which is not an ideal

number. The company should try to reduce it to less than 28

DineEquity Inc 76

percent in order to be more financially stable. Lastly, the

company’s interest earned was reduced from 2.7 in 2012, to 2.1

in 2013, and at year end 2014 was only 2.2. While a ratio

above 2 is considered adequate, due to the sharp decrease from

2012 to 2013, the company should be aware of this number and

ensure that it does not decrease further, as that could pose a

threat in the future.

Overall, our major findings from the results of our ratio

analysis show that while in some areas DineEquity’s financial

condition shows that the company remains a top industry

competitor, in others its financial condition is threatened.

DineEquity should therefore focus on maintaining the areas in

which it exceeds, and improving those in which it has a

disadvantage.

Today’s workforce is truly a mixture of different races,

ages, genders, ethnic groups, religions and lifestyles. Many

organizations have recognized that the workforce is changing and

they are working to create a work environment in which diversity

and differences are valued and in which employees can work to

their fullest. They are dealing with the problems that arise when

DineEquity Inc 77

people in the workplace communicate. Culture is an important

dimension of group diversity that influences communication.

Culture is the integrated system of beliefs, values, behaviors

and communication patterns that are shared by those socialized

within the same social group. Cultural diversity is the mixture

of societies or cultures in a specific region. It is also

referred to multiculturalism within an organization. Obvious

cultural differences exist between people, such as language,

attitudes, traditions, clothing or dress. There are also

significant variations in the way culture or society organizes

itself, in its shared morality conception, and in the behavior

they interact with their environment.

Dine Equity embraces on diversity, the company understands

that it can have a powerful effect on communication within the

organization. In today’s business world organizations have become

multicultural communities. With many new cultures now living and

working at the same place that were just rare to see only a few

years ago. Organizations should be aware of these changes to

learn how to communicate effectively without being negative. The

face of the workplace is changing as more females and more ethnic

DineEquity Inc 78

minorities are entering the work force. As a result, the

workplace is increasingly multicultural. Effective intercultural

communication requires more than simply recognizing differences;

it requires the organization to respect and know how to deal with

those differences.

Major Problems facing the firm are the recent surge in

delivery services and food trucks. Companies such as GrubHub and

Eat24 work with restaurants to deliver to homes and businesses

that can’t get directly to the restaurant for a meal. It’s

convenient and inexpensive to the customer. Other major problems

are suppliers with food and health codes. More and more consumers

want healthier options, this includes grass fed cow

meat/chickens, non GMO fruits and vegetable which will all cost

more for the company. Customers are also visiting restaurant

chains less and less due to the recent foodie culture. Foodie

culture is when customers visit different restaurants, taste and

take pictures of the food and blog about it. Since chains often

have the same exact menu they most likely won’t end up on blogs

which could give them massive amounts of exposure.

Technology plays and will play an even more important role

DineEquity Inc 79

in the daily operations of Dine equity. As technology grows

and improves, customers keep up and always expect the latest.

In the last two years, Dine Equity has introduced Intel backed

“presto” tablets; these tablets are used to build on to the

experience for the customer. The presto tablets allow the

customer to view the menu items in a three dimensional manner

which make the menu items appear more attractive vs.

displaying them on a flat paper menu. The tablets also aid in

efficiency; now the customer order to table time is cut down

as well as the time it takes for a customer to pay for their

meal and check out.

Dine equity plans on transforming the tablets into an

entertainment tool for the customer, kid friendly apps and

games will soon be incorporated as well as music libraries

where the customer will be able to play their favorite songs

and keep the children entertained for a small fee. In the

future, tablets may also be used in the kitchens allowing for

better storage and easier access to recipes. Online ordering,

online surveys and reservations are other technological

applications used by dine equity. Surveys are used as a mean

DineEquity Inc 80

to gather feedback from consumers, once consumers complete the

survey they are offered some discount or credit towards their

next visit to the establishment. The use of social media also

allows dine equity to be closer to their consumers since most

people are on social networks, dine equity can interact with

consumers and really get a feel based on what consumers like

and what they don’t like; which ultimately leads to better

service.

The leadership and management team for DineEquity make decisions

based on their model and mission.

“DineEquity unites great franchisees, brands and team

members to create the world's leading restaurant company,

one guest experience at a time.” (DineEquity.com)

Their chairman and CEO Julia Stewart has worked in the

restaurant industry for nearly 40 years and has excellent

expertise and leadership in brand revitalization and positioning.

She was the first CEO of IHOP where she implemented several

shifts in strategy that invigorated, strengthened the brand and

improved the financial performance of the company greatly. She

formed DineEquity to provide the same transformations to other

DineEquity Inc 81

companies in need like Applebee’s. Her goal was to have a

strategy that was consumer-centric focused to restore Applebee’s

to its leadership position in casual dining.

Finding an appropriate directional strategy is key for any

company. It is the plan that is typically composed of growth,

stability and retrenchment. Each orientation within directional

strategy can yield different results for a company. Growth

strategies are also aligned to expand the company’s activities,

stability strategies make no change to the company’s current

actions, and retrenchment strategies reduce the company’s level

of activities.

In DineEquity’s case, a targeted growth strategy similar to

the ones applied to IHOP and Applebee’s is their best bet for the

future. In 2012 they revamped Applebee’s these past years it is

improving and becoming a large name in casual dining.

DineEquity’s next step is to find the next company that can use

Stewart’s touch to revitalize a brand. This will grow the brand

and create more opportunities for franchisees and shareholders.

The return on investment for DineEquity is declining however it

does not go negative and is not high. The ratio is just enough

DineEquity Inc 82

that the profits and investments are well proportioned. This

shows what they are investing is paying off appropriately.

DineEquity has $34.93 earnings per share according to Hoover’s

Database. This is high for the company’s size. DineEquity should

focus on using the capital to gain revenue rather than expand

investment.

These ratios show that leadership is still developing

effective methods of their growth strategy. They should continue

it and perhaps root back to ways that made IHOP revitalized.

Coming to terms with an appropriate strategy will be effective

method for DineEquity.

As a result of the new implementation and changes the value

chain will be more focused on technology innovations. Employees

will be trained to use the latest technology to communicate and

serve customers better. By implementing the use of tablets this

will change the business model and value chain to support the

ever-changing technology evolution. This will also make it a lot

of faster for employees to work and save time in order to focus

on other responsibilities that do not have technology support.

There are also cons to relying on too much technology, because

DineEquity Inc 83

jobs may be taken away since a computer has the same

capabilities. Therefore, customer service must be up to par in

order to keep that personal customer relationship with dine-in

customers. The company has invested so much in renovating the new

restaurants and purchasing technology that shareholders must see

an increase due to these changes. Otherwise adjustments and

changes must be made within the value chain, such as the R&D

department.

Before Dine Equity acquired Applebee’s their main goal was

to provide delicious food for their customers through IHOP. Once

the company became Dine Equity, they found it was beneficial to

get into franchising. The results were positive to the point

where their main focus became brand revitalization and

franchising how to. They plan to come out with another food chain

similar to Chipotle. Once the company sees a result in using

tablets or technology, their business model might change once

again.

DineEquity Inc 84

Work Cited

2009 DineEquity Annual Report. Rep. DineEquity, Inc., n.d. Web. 10 Feb.

2015.

2010 DineEquity Annual Report. Rep. DineEquity, Inc., n.d. Web. 10 Feb.

2015.

2011 DineEquity Annual Report. Rep. DineEquity, Inc., n.d. Web. 10 Feb.

2015.

2012 DineEquity Annual Report. Rep. DineEquity, Inc., n.d. Web. 10 Feb.

2015.

2013 DineEquity Annual Report. Rep. DineEquity, Inc., n.d. Web. 10 Feb.

2015.

"Adding Value through Process Mapping." – Procurement – CSCMP's Supply

Chain Quarterly. Web. 12 Feb. 2015.

<http://www.supplychainquarterly.com/topics/Procurement/scq2

01102map/>.

"Agriculture and Food Supply Impacts & Adaptation." EPA.

Environmental Protection Agency, n.d. Web. 04 Feb. 2015.

<http://www.epa.gov/climatechange/impacts-adaptation/agricul

ture.html>.

DineEquity Inc 85

"Applebee's There's No Place like the Neighborhood."

Applebee's At a Glance. Web. 2 Mar. 2015.

<http://www.applebees.com/about-us/at-a-glance>.

Konrad, Alex. "Applebee's Will Install 100,000 Intel-Backed

Tablets Next Year In Record Rollout." Forbes. Forbes

Magazine, n.d. Web. 2 Feb. 2015.

<http://www.forbes.com/sites/alexkonrad/2013/12/03/applebees

-intel-tablet-rollout/>.

Chan, Amanda L. "Menu Labeling Law: Calorie Counts Are A 'Thorny'

Issue, FDA Head Says." The Huffington Post.

TheHuffingtonPost.com, n.d. Web. 06 Feb. 2015.

<http://www.huffingtonpost.com/2013/03/12/menu-labeling-law-

calorie-counts-fda_n_2860331.html>.

"CSCS." Centralized Supply Chain Services LLC. CSCS, n.d. Web. 02 Feb.

2015. <http%3A%2F%2Fwww.cscscoop.com%2Fmembership>.

"DineEquity, Inc. - Brands." DineEquity, Inc. - Brands. Web. 2 Mar.

2015.

<https://rn21.ultipro.com/DIN1000/JobBoard/listjobs.aspx?

Page=Browse>.

"DineEquity, Inc. Launches Purchasing Co-Operative for the."

DineEquity Inc 86

Bloomberg.com. Bloomberg, n.d. Web. 04 Feb. 2015.

<http://www.bloomberg.com/apps/news?

pid=newsarchive&sid=aEwozPEXR6LY>.

"DineEquity CEO: Pay-at-table Technology." CNBC. Web. 12 Feb.

2015. <http://video.cnbc.com/gallery/?video=3000280798>.

"DINEEQUITY, INC. Revenue and Financial Data." Hoovers.com.

Hoover's, Inc., n.d. Web. 10 Feb. 2015.

DineEquity Management Presentation. Rep. DineEquity, Inc., 04 Nov.

2014. Web. 13 Feb. 2015.

DineEquity Second Quarter 2014 10-Q. Rep. DineEquity, Inc., 29 July

2014. Web. 10 Feb. 2015.

DineEquity Third Quarter 2014 10-Q. Rep. DineEquity, Inc., 04 Nov. 2014.

Web. 10 Feb. 2015.

"How DineEquity's CEO Is Transforming IHOP and

Applebee's." TheStreet. 22 Aug. 2014. Web. 12 Feb. 2015.

<http://www.thestreet.com/story/12853621/1/how-dineequitys-

ceo-is-transforming-ihop-and-applebees.html>.

"How Technology Is Changing the Restaurant Industry." TNW Network

All Stories RSS. N.p., 22 Sept. 2012. Web. 05 Feb. 2015.

DineEquity Inc 87

<http://thenextweb.com/insider/2012/09/22/how-technology-

changing-restaurant-industry/>.

"Investor Overview." Dineequity.com. DineEquity,Inc., n.d. Web. 10

Feb. 2015.

"IPads Increasingly Crop up on Restaurant Menus for Ordering."

USATODAY.COM. N.p., n.d. Web. 05 Feb. 2015.

<http://usatoday30.usatoday.com/tech/news/story/2011-09-20/i

pad-restaurant-menu-ordering/50482900/1>.

"Offers | IHOP at Home." Offers | IHOP at Home. Web. 2 Mar. 2015.

<http://ihopathome.com/offers/>.

"Political Problems Affecting the Restaurant Industry." Small

Business. N.p., n.d. Web. 05 Feb. 2015.

<http://smallbusiness.chron.com/political-problems-

affecting-restaurant-industry-62098.html>.

"Restaurants Projected to Add over 300,000 Jobs in 2015." National

Restaurant Association. N.p., n.d. Web. 04 Feb. 2015.

<http://www.restaurant.org/News-Research/News/Restaurants-

projected-to-add-over-300,000-jobs-in>.

"Recycling & Waste Reduction." National Restaurant Association. N.p.,

n.d. Web. 05 Feb. 2015. <http://www.restaurant.org/Industry-

DineEquity Inc 88

Impact/Conservation/Recycling>.

"The Effects of the North American Free Trade Agreement." Small

Business. N.p., n.d. Web. 05 Feb. 2015.

<http://smallbusiness.chron.com/effects-north-american-

trade-agreement-3845.html>.

Turow, Eve. "You Need to Know: The Minimum Wage Wars." The

Huffington Post. TheHuffingtonPost.com, n.d. Web. 04 Feb. 2015.

<http://www.huffingtonpost.com/eve-turow/you-need-to-know-

the-mini_b_5522652.html>.

"Valuing Our Employees." Dineequity.com. DineEquity, Inc., n.d.

Web. 10 Feb. 2015.

"What's Hot Culinary Forecast." National Restaurant Association. N.p.,

n.d. Web. 05 Feb. 2015. <http://www.restaurant.org/News-

Research/Research/What-s-Hot>.

DineEquity Inc 89