Pancake House Flips Its First New Menu

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IHOP Corp. has rolled out its first major new menu since the Glendale-based restaurant chain was founded in 1958 in an attempt to broaden its appeal beyond breakfast and raise sagging sales and revenues.


The new menu, which still includes numerous kinds of pancakes, now features 13 new items designed to pull in diners who want something more than breakfast-related items. Grilled cod with lemon hollandaise and a shrimp Caesar salad are among the new features. The menu was the result of six months of research into the tastes and preferences of more than 20,000 IHOP customers, the company said in a statement.


“This is the most ambitious and significant change we’ve seen in some time, the results of which will be illuminating in how far they’ve come in changing consumer perceptions,” said Bryan Elliott, restaurant analyst for Raymond James & Associates.


The menu change is part of a larger effort by CEO Julia Stewart, who joined the company three years ago with plans to resurrect the chain after its 12-year track record of zero sales growth. She hopes to turn around the finances of the struggling restaurant operator with new ad campaigns, product promotions and even a change of the business model to a traditional restaurant franchiser, rather than a developer.


The chain ran aground in the 1990s because it focused on building more restaurants, which left little cash to reinvest. By switching to a franchisor model, the chain now has just 10 company-owned restaurants, down from 44 in 2003 and 85 in 2002.


IHOP Corp.’s first-quarter net income and revenue decreased, missing analysts’ estimates, due to disappointing same-store sales growth of just 0.6 percent. That figure was not enough to offset increases in general and administrative spending throughout the quarter. Same-store sales growth fell sharply from a more robust 6.8 percent in the first quarter of 2004.


Since Stewart’s arrival, the company has been focusing more on continuing to improve store-level operations and increasing the amount of data it’s collecting from the restaurants that can be used to plan changes. These are things successful restaurant chains do routinely, but that IHOP has not, Elliott said.


“The company really has not been a marketing- and operations-driven business,” he said.


Core menu additions that lean toward more healthy lifestyles, new marketing campaigns and promotions will likely continue for some time to keep this process going.


“They have spent a lot of time testing products, but the question is: Can they convince consumers they’re a viable option for lunch and dinner, rather than just a place for pancakes?” Elliott said. “I’m cautiously optimistic they’ll see some success.”

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