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
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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
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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
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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
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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
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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
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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.
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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
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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
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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
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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,
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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.
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("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.
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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:
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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.
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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.
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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
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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
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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
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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
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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.
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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
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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
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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
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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
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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.
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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)
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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
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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
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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
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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)
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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
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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
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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
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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
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