Dine Brands’ $80M Fuzzy’s Deal Highlights Industry’s Shift to Off-Premises

Casual dining group Dine Brands is acquiring fast-casual chain Fuzzy’s Taco Shop.

The parent company of the Applebee’s and IHOP brands announced Monday (Dec. 5) its $80 million deal to purchase the taco chain that includes 138 locations in 18 states.

The acquisition marks the latest response from the restaurant industry in response to a consumer preference shift that has seen increasing demand for convenient off-premises options.

“Fuzzy’s Taco Shop is a compelling business with a loyal customer base and a distinct identity. It is an attractive asset with a tremendous growth trajectory and will be a complementary addition to our highly franchised portfolio,” Dine Brands CEO John Peyton said in a statement.

The restaurant company makes the vast majority of its sales via dine-in. The group reported in its third-quarter financial results last month that off-premises channels accounted for about a quarter of Applebee’s sales and about a fifth of IHOP’s.

Both of these brands have been looking to drive up that off-premises mix to seize on consumers’ increasing demand for at-home convenience as well as on the opportunity digital channels present to gather customer data, enabling more effective marketing and innovation. Both casual dining chains have been adding virtual brands to their kitchens, with IHOP implementing this strategy in 1,100 restaurants.

In addition to boosting off-premises sales, these locations also drive traffic at off-hours, when staff and equipment tend to be underutilized.

“IHOP [is] 24/7 at the majority of their locations, but they’re really busier in the mornings than they are at night,” Alex Canter, CEO of virtual restaurant company Nextbite, told PYMNTS’ Karen Webster in a June interview. “So, we’ve designed two concepts for them: a grilled cheese concept and a quesadilla brand that is performing exceptionally well from 9 p.m. to 5 in the morning.”

Additionally, IHOP has also opened a handful of fast-casual locations under the name Flip’d. Indeed, the fast-casual category presents restaurants with a way to meet diners’ demand for convenience while providing a more premium experience than a traditional, quick-service restaurant.

“People are wanting food delivered … or wanting it wherever they want and whenever they want it — sort of the Amazon-ation of the consumer,” David Bloom, chief development and operations officer for Capriotti’s and Wing Zone, told PYMNTS in an interview last year, adding that fast-casual is “in the sweet spot of where the consumer is and where they seem to be going.”

Indeed, the majority of consumers now place restaurant orders online for off-premise consumption each month, according to data from PYMNTS’ October study “Super Apps for the Super Connected,” created in collaboration with PayPal.

Get the study: Super Apps for the Super Connected

“We’ve continued to see an increased demand for pickup and delivery orders since guests are prioritizing convenience,” Jenn Saunders-Haynes, director of catering at Subway, said in an interview with PYMNTS.

In fact, the PayPal study, which drew from a survey of more than 9,900 consumers across the U.S., the U.K., Australia and Germany, found that 70% of millennials had purchased restaurant meals digitally for pickup or delivery in the prior 30 days, as had 61% of zoomers, 68% of bridge millennials, 64% of gen X consumers and 49% of baby boomers and seniors.