Toque of the Town: Guest Work at IHOP

Dustin Dixon uses customer research to meet guest desires for both classics and new tastes at IHOP.

By Monica Rogers, Contributing Editor -- Chain Leader, 12/1/2006

Evolving something as monolithically middle American as 1,278-unit IHOP means somebody’s got to figure out what’s iconic and what’s simply tired. Steeply pitched blue roofs and Rooty Tooty Fresh ’N Fruity breakfasts are enduring icons, says Vice President of Product, Quality and Procurement Dustin Dixon. But vinyl booths and “menu items that had stayed behind for many, many years” were among tired elements in need of upgrades, he says.

The Glendale, Calif.-based family-dining chain conducted customer research to figure out what to keep and what to change. “We have done more guest research in the past three years than we did in the previous 46,” says Dixon. “We’ve basically shifted from development by intuition to development based on extensive research.”

Research-Driven Development

The new approach affects all food at IHOP, from breakfast commodities such as bacon and hash browns to promotional dishes to new core-menu items. For example, IHOP’s move to not-from-concentrate orange juice, which will be completed in June ’07, happened “because guests across the board said they wanted better juice,” says Dixon. The company featured banana and cinnamon in its big-selling Cinn-A-Stacks and Stuffed French Toast Delights promotions this year because research found those flavors scored strongest with guests. And this month’s launch of eight new core menu items—a systemwide menu update—includes products designed to meet guest desires for convenient and portable foods, savory crepes, and bigger, bolder flavors. Still to come, the company will launch its IHOP ’n Go carryout program early next year with better heat-retaining, clear-lidded packaging.

Tapped in June to lead IHOP through these multidimensional menu changes, Dixon strategically pinpointed which guest desires were business priorities and which could be phased in later. “Our menu was tired, and change was needed, but you can’t overwhelm the system with 15 new items at once,” says Dixon, who joined IHOP in April 2004 as director of purchasing and quality assurance after working in quality assurance for Applebee’s International and Darden Restaurants.

Leading a development team that works closely with marketing, purchasing, training and operations, Dixon trimmed IHOP’s inventory before adding to menus. “What we’ve found is that eliminating items to streamline the menu can be a competitive advantage,” he says. IHOP’s more efficient inventory system minimizes the number of ingredients, cross-utilizes and specifies the same products across the country.

Upgrading Ingredients

Beginning with breakfast foods—IHOP’s core-equity priority—Dixon and team evaluated products already in the system to determine which items guests liked best. Then they moved the entire system toward use of highest-scoring products.

For example, guests wanted bacon with a sweet and smoky taste, balanced by salt, but IHOP also had to determine what guests preferred in the thickness of the slice. With hash browns, the company found that they weren’t seasoned consistently from kitchen to kitchen, so it went to a preseasoned product.

Once guests specified their favorite versions of each ingredient, Dixon and team tested them systemwide to ensure that guests used to different product in different regions liked the new standards. “In every case, the new standard was rated as better,” he says.

Beyond breakfast, IHOP switched to shaved sirloin for its Philly Cheese Steak Super Stacker. Launched in spring 2004, the $7.99 sandwich originally featured roast-beef strips. “But guests indicated that the roast beef was not the cut of meat they expected on this sandwich. They wanted a more traditional, pull-apart meat,” says Dixon. Sales of the sandwich more than doubled after the company switched to the new meat in November 2005. “Guests found it more tender and flavorful,” he says.

IHOP is now standardizing specs for chicken (limiting inventory to whole-muscle breast and chicken strips), re- evaluating burger specs and looking at soups.

Shaping the Core

With these and other behind-the-scenes improvements in place, Dixon and team moved to fill gaps and evolve items on the core menu. Scheduled to launch this month, the eight-item update includes a new crepe section, two new burgers and a portable breakfast sandwich.

Sweet and Savory Crepes is a new menu category for IHOP. “We have a long history of success with crepes,” says Dixon. While sweet versions have always done well at IHOP, savory iterations have come and gone. But recent research found that savory resonated with guests. Screening numerous ingredient combinations, IHOP found that chicken crepes and vegetable crepes were most popular. So savory selections rolled this month including the best-selling Garden-Stuffed Crepes, $6.99, with Swiss cheese and eggs scrambled with spinach, mushrooms and onion. Chicken Florentine Crepes, $7.99, feature chicken-breast strips sauteed with spinach, mushrooms and onions, and Swiss cheese. And Cheesy Ham and Egg Crepes, $7.49, include ham, American cheese and scrambled eggs. All are topped with hollandaise sauce.

IHOP also launched Corn Cake pan cakes, $5.99, to replace its Country Griddle cakes. Guests said they wanted something that had a buttermilk-pancake texture with a sweet corn taste. “Country Griddle [made with cream of wheat in the mix] was our previous textured pancake and ate more like cornbread,” Dixon explains.

Shaping new sandwiches, Dixon saw potential for the “natural relationship between breakfast elements and lunch elements.” He merged bacon and egg with beef to make the new Bacon and Egg Cheeseburger, $7.99. Bacon, barbecue sauce, cheddar cheese, lettuce and red onion on a Romano-Parmesan bun, bumps IHOP’s new BBQ Bacon Cheeseburger, $7.99, to premium status.

Portable IHOP

Dixon says the time was also right for creating a portable breakfast sandwich. As IHOP prepares to launch its IHOP ’n Go program in early ’07, the Ham & Egg Melt, $6.99, is the forerunner to more made-to-travel items. The sandwich includes ham, scrambled eggs, and Swiss and American cheeses on grilled sourdough bread.

According to Dixon, the goal with IHOP ’n Go is “to significantly improve carryout without taking it to an extreme or requiring significant investment by our franchisees.” Menus will specify which items travel best, point-of-purchase materials will promote IHOP ’n Go, and franchisees will have the option of dedicating parking spots for carryout customers. The company has also instituted procedures for accepting phone orders that ensure the guest is quoted the appropriate time for pickup and that the order is accurate.

Equally important to the menu strategy, limited-time offers will continue to enliven IHOP’s menu five to eight times a year. While he won’t say what’s coming for ’07, Dixon says the promotional lineup echoes ’06 objectives: to drive traffic and increase sales by promoting a mix of value-priced items, new news and iconic items. IHOP’s current promotion spotlights the Rooty Tooty Fresh ’N Fruity, $6.29, the company’s longstanding best-selling breakfast combo of two eggs, bacon, sausage and pancakes with choice of fruit toppings. Bundled with hash browns, the meal is marketed as the Super Rooty Tooty Fresh ’N Fruity.

And one of two best-selling menu promos for 2006, IHOP’s Cinn-A-Stacks pancakes, which ran from March through April, grew out of a previous promotional menu item, Cinnamon Roll French Toast. “We loved the cinnamon sugar on that and decided to smear some on pancakes, just like a hot, fresh cinnamon roll. We topped it with cream-cheese icing, and it was fabulous,” Dixon says. For the promo, guests built their own meal, matching two pan cakes with choice of additional items.

Profitable Traffic

“The goal with all of these promotions is not just to drive traffic, but to drive profitable traffic,” says Dixon, crucial given the tough operating climate. “Profit comes from much more than just price.” In the third quarter, for example, traffic from the company’s Funnel Cake Carnival promotion in July and August and French Toast Fantasy promotion in September and October improved same-store sales 1.3 percent, despite pricing moderation on the part of franchisees that led to slightly decreased check averages.

One help here? “The systemwide launch of December’s newly updated core menu will allow franchisees to take some slight price increases,” says Mike Gallo, senior vice president and research analyst with Albany, N.Y.-based CL King & Associates, an institutional research company that covers IHOP. “All of their peers have done it, and I think it makes sense from a relative value perspective for IHOP to do this, too.”

But check-average variance aside, observers such as Mark Smith, an equity analyst who specializes in the restaurant industry for New York-based Sidoti and Company, applaud IHOP’s performance. “These guys have done a pretty good job despite a difficult climate,” he says. “They have a good management team focused on improving guest satisfaction, solid promotions, and are committed to helping franchisees. Fifteen quarters of positive same-store-sales numbers is the proof that they’re on target with their efforts.”