IHOP Is Testing An Alcohol Menu As It Continues To Focus On Its Lunch And Dinner Business

Food & Drink

IHOP wants you to pair your French toast with a mimosa, and your “IHOb” burger with a beer. Finally.

The company today announced a “Bubbles, Wine & Brews” menu, featuring curated and locally sourced beer and wine options, as well as Bud Light, Blue Moon and Corona, and mimosas and wines from Barefoot–Bubbly Brut, Bubbly Chardonnay and Cabernet Sauvignon.

The pilot is now available at three restaurants in San Diego and New Mexico and will expand to additional markets, including New York, Rhode Island, Maryland and Ohio, in the coming months. It will soon be available to all franchisees across the 1,700-unit system, if they so choose.

President Jay Johns admits securing a liquor license–which can cost anywhere from $300 to $14,000 depending on location–may pose a barrier for entry, but adds that several franchisees are eager to introduce alcohol offerings nonetheless.

“As we continue to roll out to more locations, we hope the optimizations and key learnings [from the test] will continually offer franchisees the tools needed to successfully launch in their markets,” he said.

In fact, this menu was created using feedback and learnings from several IHOP franchisees who have been offering one-off alcohol programs for the past few years.

The timing now, however, seems a bit more essential as the chain continues its long recovery from a debilitating 2020 incited by the COVID-19 pandemic that shuttered dining rooms across the country. The chain’s Q2 2021 earnings remained negative, though the -3.4% was a material improvement of nearly 18 percentage points from the first quarter.

Alcohol could push IHOP’s recovery from a crawl to a sprint, as it yields margins of about 75% for beer and 60% to 70% for wine. That’s compared to the general profit margin of a restaurant that only sells food, which is about 3% to 6% on average.

For additional optimism, Applebee’s, IHOP’s sister chain at Dine Brands, could provide a target benchmark, historically generating about 15% of its sales from alcohol.

And as it turns out, more people are drinking now, so the new menu could provide a traffic boost for measure. Researchers from Johns Hopkins and the University of Maryland found that 60% of Americans are drinking more compared to pre-pandemic times.

IHOP facilitated a survey itself last month to gauge interest from its loyal customers. Results showed that 66% of its recent guests and 58% of its younger guests (21 to 34) want to have an alcoholic beverage with their IHOP meal. Further, nearly 50% of drinkers ages 21 to 70 said they would be more likely to visit an IHOP if alcoholic beverages were served.

“Through research, we’ve learned that consumers are excited for these new menu options,” Johns said. “We maintain a steadfast commitment to meet the ever-changing needs of our guests. As we explore ways to enhance the dining experience for our guests, we felt adding alcoholic beverage options to our menu is a right next step to propel that forward.”   

Notably, these options should also complement the brand’s lunch and dinner dayparts, both of which have been a priority area throughout the past couple of years and will continue to be so. IHOP launched its “IHOb” campaign in 2018 to promote a new burger line, for example, and its IHOPPY Hour in 2020–its first-ever lunch and dinner-focused value menu.

“We see this launch as part of our continued prioritization of the p.m. daypart, with hopes of attracting new guests during different times of the day. While we are offering morning drinks, like mimosas and sparkling wine, we are also offering afternoon and evening-focused beverages to accompany IHOP favorites for meals beyond breakfast,” Johns said. “Adult beverages offer a terrific innovation and evolution to enjoy IHOP for every occasion.”

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