The Applebee's Steak Experiment That Didn't Pay Off

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It was the spring of 2016. Applebee's was struggling, facing sales dropping while fast-casual rivals like Panera and Chipotle picked up steam. So Applebee's, whose menu centers on steak, seafood, and burgers, decided to do something radical, changing the way those items were prepared to attract new customers.

Shortly before, Applebee's test kitchen began experimenting with new ways to cook the signature steak and seafood dishes. Corporate chefs finally settled on an alternative: Wood-burning grills, instead of the existing gas ones, on which the steak would be cooked over an open flame. With CEO Julia Stewart's go-ahead, the restaurant chain began the expensive process of removing each location's gas grills and replacing them with new, wood-burning ones.

"It is a big, bold move," she said to Fortune at the time. "And big, bold moves make your existing guests want to come in more often, and guests that haven't been there for a while try you again." It had a big, bold price tag, too, of $75 million, and came along with other changes designed to lure in millennials, such as switching to USDA choice steaks and cutting them fresh on-site. Just one teeny-tiny little problem: It didn't work.

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Applebee's introduced the new wood grills in May 2016, and despite the new initiative, its sales still dropped more than 4% that quarter. Stewart blamed advertising. She said that customers might perceive the steaks as more expensive, even though she said they were at what the company called an "everyday value" price. "It's less about the price that franchisees are actually charging for it," she said to Nation's Restaurant News, a trade publication. "It's the fact that we didn't put the price on television."

Not so fast. Zane Tankel, who owned several dozen Applebee's restaurants in the New York metro area, said the following year that the problem wasn't perception but the actual price. An eight-ounce wood-grilled steak at one of Tankel's restaurants sold for $20.99, far higher than the usual prices. In an interview with Marketplace, he said that switching to this higher-end product "abandoned the traditional Applebee's customer."

Stewart resigned as CEO of Applebee's parent company, DineEquity, in early 2017 after sales continued to slide. And after she left, Applebee's made another big change: Removing the brand-new wood grills from all of the restaurants by the end of that year. Nearly a decade later, Applebee's continues to struggle, only recently seeing sales increase for the first time in years.