Dine Brands Global, Inc.: Form 10-Q for the period ended Mar 29, 2026

Management's Discussion and Analysis of our results of operations and financial condition should be read in conjunction with the Condensed Consolidated Financial Statements included in this Form 10-Q. This Item 2 is organized as follows:

• Consolidated Results
• Key Performance Indicators
• Segment Results
• Non-Segment Results
• Liquidity and Capital Resources of the Company
• Critical Accounting Estimates

Consolidated Results

(In millions)

Total revenues increased $10.4 million, largely driven by an $11.9 million increase from the company-owned restaurant revenues from restaurants acquired since the first quarter of 2025. This increase was partially offset by a $1.3 million decrease in franchise revenues primarily driven by lower proprietary product sales due to timing, weaker international franchisee performance and a decrease in franchise termination fees recognized in the current period as compared to the prior year period. In addition, franchise revenues were impacted by a reduction in the number of franchised restaurants due in part to the acquisition of 12 Applebee's restaurants in May 2025 and 12 Applebee's restaurants in February 2026. Total cost of revenues increased $13.3 million primarily due to the increase in company-owned restaurants.

Income before income taxes in the three months ended March 29, 2026 decreased largely due to a decrease in gross profit, increase in interest expense and an increase in general and administrative expenses, partially offset by a decrease in closure and impairment charges and the gain on disposition of assets. The increase in interest expense is primarily the result of the refinancing of our 2025 Class A-2 Notes completed in June 2025 which resulted in increased principal and a higher interest rate. The increase in general and administrative expenses is primarily due to our investment in our dual-branded and company-owned restaurant initiatives. Closure and impairment charges decreased as a result of less one-time lease termination and lease asset impairment costs incurred in the current year as compared to the respective prior year period. Gain on disposition of assets was related to the sale of land and building of two IHOP restaurants.

Key Performance Indicators

In addition to revenues, cost of revenues, and gross profit in evaluating the performance of each of our brands, management also considers the following key performance indicators in evaluating our business:

"System sales" are retail sales at IHOP, Applebee’s and Fuzzy's restaurants operated by franchisees reported to the Company and revenues generated at company-owned restaurants. Sales at restaurants that are operated by franchisees are not revenues attributable to the Company. An increase in system sales of franchised restaurants will result in a corresponding increase in our royalty revenues, while a decrease will result in a corresponding decrease in our royalty revenues.

"Domestic same-restaurant sales change" reflects the percentage change in sales of domestic restaurants in any given fiscal period that operated during the comparable prior year period and have been open for at least 18 months. Due to new restaurant openings and restaurant closures, the restaurants open throughout both fiscal periods being compared may be different from period to period.

"Same-restaurant sales change" reflects the percentage change in sales of domestic and international restaurants in any given fiscal period that operated during the comparable prior year period and have been open for at least 18 months. Due to new restaurant openings and restaurant closures, the restaurants open throughout both fiscal periods being compared may be different from period to period.

"Domestic average weekly unit sales" represents the average sales generated per restaurant per operating week during the reporting period. This is calculated by dividing total restaurant sales by the number of operating weeks for all restaurants open during the period. For restaurants that were open for only part of the period, adjustments are made to the number of operating weeks to correspond to the period there were restaurant sales.

"Net development" refers to the overall change in the number of restaurants during a period, calculated as total openings less total closures.

(a) The calculation of franchise sales percentage change and average weekly unit sales excludes restaurants that were closed or acquired by the Company.

(b) Included in the IHOP franchise restaurants closed and IHOP company-owned restaurants opened are 10 restaurants acquired by the Company in March 2025. Included in the Applebee's franchise restaurants closed and Applebee's company-owned restaurants opened are 12 restaurants acquired by the Company in February 2026.

Dual-branded restaurants are defined as restaurants that operate our IHOP and Applebee's restaurant concepts under two separate franchise agreements but within one restaurant location. Because of this, each dual-branded restaurant is counted in both IHOP and Applebee’s restaurant count and activity.

As of March 29, 2026, we had 35 dual-branded domestic IHOP and Applebee's restaurant locations. During the three months ended March 29, 2026, we had two existing company-owned Applebee's restaurants which added the IHOP brand, three existing Applebee's franchises which added the IHOP brand, one existing IHOP franchise which added the Applebee's brand, and two new franchise restaurants which added to both brands. This totaled 10 dual-branded domestic openings.

During the three months ended March 30, 2025, we had one existing IHOP franchise which added the Applebee's brand for a total of one dual-branded opening.

As of March 29, 2026, we had 37 dual-branded international IHOP and Applebee's restaurant locations. During the three months ended March 29, 2026, we had five new franchise restaurants which added both brands. This totaled 10 dual-branded international openings.

As of March 30, 2025, we had 19 dual-branded international IHOP and Applebee's restaurant locations. During the three months ended March 30, 2025, we had one existing Applebee's franchise which added the IHOP brand for a total of one dual-branded international opening.

The following table shows the effects of the domestic and international restaurant count methodology described above:

As our dual-branded business expands, we may reevaluate how these restaurants are counted in future disclosures.

IHOP's system domestic same-restaurant sales remained flat for the three months ended March 29, 2026 as compared to the respective prior year period, due to an increase in average check offset by a decrease in traffic.

Based on data from Black Box Intelligence, a restaurant sales reporting firm ("Black Box"), IHOP domestic same-restaurant sales outperformed for the three months ended March 29, 2026 in the family dining category (excluding IHOP).

According to Black Box, the family dining category experienced a decrease in same-restaurant sales resulting from a decrease in customer traffic, partially offset by an increase in average customer check for the three months ended March 29, 2026.

(1) Primarily to-go, delivery and catering sales.

IHOP's off-premise sales for the three months ended March 29, 2026 increased by $1.9 million, as compared to the respective prior year period primarily due to the brand's focus on proven delivery promotions.

Applebee’s system domestic same-restaurant sales increased 1.9% for the three months ended March 29, 2026 as compared to the respective prior year period. The increase was due to an increase in average check partially offset by a decrease in traffic.

Based on data from Black Box, Applebee's domestic same-restaurant sales for the three months ended March 29, 2026 outperformed the casual dining category (excluding Applebee's). Black Box reported the casual dining category experienced a same-restaurant sales increase for the three months ended March 29, 2026 driven by an increase in average customer check, partially offset by a decrease in customer traffic.

(1) Primarily to-go, delivery and catering sales.

Applebee's off-premise sales for the three months ended March 29, 2026 increased $5.9 million as compared to the respective prior year period primarily due to limited time offers paired with delivery and digital promotions.

Quarterly Domestic Same-Restaurant Sales - Fuzzy's

Fuzzy's system domestic same-restaurant sales increased 2.4% for the three months ended March 29, 2026 as compared to the respective prior year period. The increase was primarily due to an increase in average check resulting primarily from menu price increases, partially offset by a decrease in traffic.

Segment Results

(In millions)

Our total franchise segment profit decreased $2.6 million in the three months ended March 29, 2026 as compared to the same respective period of 2025.

Franchise revenues decreased as a result of the following:

• IHOP franchise revenue decreased $1.7 million primarily due to a decrease in proprietary product sales, decreased performance of international franchisees and less fees related to franchisee terminations in the current year. The decrease in proprietary product sales was primarily due to timing of sales to our distribution partners. The decrease in franchise termination fees was primarily due to fewer franchisee restaurant closures as compared to the respective prior year period of 2025.
• Applebee’s franchise revenue decreased $0.1 million primarily due to a decrease in the number of franchise restaurants due in part to the acquisition of 12 Applebee’s restaurants in May 2025 and 12 Applebee's restaurants in February 2026. The decrease was partially offset by a 1.9% increase in franchise domestic same-restaurant sales and an increase in forfeited franchise fees due to restaurant closures.
• Fuzzy’s franchise revenue decreased $0.2 million primarily due to a decrease in royalty revenues and proprietary product sales as a result of a decrease in the number of franchise restaurants.
• Advertising revenue increased $0.5 million due to a 1.9% increase in Applebee's domestic same-restaurant sales and a 2.4% increase in Fuzzy's domestic same-restaurant sales, partially offset by a decrease in the number of Applebee's and Fuzzy's franchise restaurants.

Franchise expenses increased as a result of the following:

• IHOP franchise expenses increased $0.8 million primarily due to an increase in bad debt reserves, partially offset by a decrease in the cost of proprietary product sales.
• Applebee’s franchise expenses decreased $0.4 million primarily due to a decrease in bad debt reserves as compared to the respective prior year period of 2025.
• Fuzzy’s franchise expense increased $0.2 million primarily due to an increase in bad debt reserves.
• Advertising expenses increased $0.5 million given the increase in advertising revenue.

(In millions)

In February 2026, the Company acquired 12 Applebee's restaurants from a franchisee. As of March 29, 2026, the Company owned 86 restaurants compared to 58 restaurants as of March 30, 2025. The change in company-owned restaurant revenue and expenses is primarily driven by the increase in the number and timing of restaurants acquired since Q1 2025. Company-owned restaurant segment loss for the three months ended March 29, 2026 was primarily due to costs of transitioning the restaurants, including closures from remodeling activities.

(In millions)

Rental segment profit for the three months ended March 29, 2026 increased compared to the respective prior year period, primarily due to a non-recurring impairment of a lease asset in the respective prior year period.

Non-Segment Items

(In millions)

Total general and administrative expenses for the three months ended March 29, 2026 increased $1.8 million, primarily due to an increase in employee costs as we invest in training, development, and operations related to dual-branded and company-owned restaurants, partially offset by a decrease in professional service fees due to higher litigation expenses incurred in the prior year period.

(In millions)

Interest expense, net, increased $4.1 million for the three months ended March 29, 2026, primarily due to the refinancing of our 2025 Class A-2 Notes at a higher interest rate and an increased principal in June 2025, and a decrease to interest income due to reduced cash balances.

(In millions)

For the three months ended March 29, 2026, we recorded $0.8 million of an increase in reserves related to properties for which we are the lessee but have ceased using the property in prior periods. This compares to closure and other asset impairment charges for the three months ended March 30, 2025 primarily related to the impairment of an asset upon the closure of certain IHOP restaurants in March 2025.

(In millions)

23

Amortization of intangible assets primarily relates to Applebee's and Fuzzy's franchise rights. Amortization increased $1.1 million compared to the same respective prior period due to the reclassification of certain indefinite-lived intangible assets to finite-lived. In addition, in the current year certain finite-lived intangible assets useful lives were shortened.

(In millions)

The gain on disposition of assets for the three months ended March 29, 2026 primarily relates to the sale of land and building on which two IHOP properties were located.

(In millions)

The effective tax rate for the three months ended March 29, 2026 was lower than the rate of the prior comparable period primarily due to a higher tax deduction related to stock-based compensation resulting from an increase in our share price.

Liquidity and Capital Resources of the Company

Our total cash balances including restricted cash, net of revolving credit facility borrowings, at March 29, 2026 and December 28, 2025 were as follows:

(In millions)

Cash Flows

In summary, our cash flows for the three months ended March 29, 2026 and March 30, 2025 were as follows:

(In millions)

Operating Activities

Cash provided by operating activities decreased $8.6 million during the three months ended March 29, 2026 compared to the same period of the prior year. This decrease was primarily attributable to the impact of performance plan compensation payments. This was partially offset by a decrease in income tax payments compared to the same period of the prior year.

Investing Activities

Investing activities used net cash of $7.7 million for the three months ended March 29, 2026 compared to using net cash of $1.9 million during the comparable prior period. The increase in cash used in investing activities is largely driven by the remodels and construction of the company-owned restaurants partially offset by the sale of two properties.

Financing Activities

Cash flows used in financing activities increased $16.2 million for the three months ended March 29, 2026. The increase in cash used in financing activities was primarily due to $22.0 million in repurchases of common stock, partially offset by a decrease in dividends paid.

Long-Term Debt

In addition to the below, see Note 7 — Long-Term Debt, of the Notes to Condensed Consolidated Financial Statements, for additional detail on long-term debt, including key provisions potentially impacting liquidity.

On February 16, 2023, our Company's Board of Directors authorized a debt repurchase program of up to $100 million. Repurchases of the Company's debt, if any, are expected to reduce future cash interest payments, as well as future amounts due at maturity or upon redemption. Under the authorization, the Company may make repurchases of the Company's debt from time to time in the open market or in privately negotiated transactions upon such terms and at such prices as management may determine.

Make-whole Premiums

We may voluntarily repay the Class A-2 Notes at any time; however, if repaid prior to certain dates we would be required to pay make-whole premiums. As of March 29, 2026, the make-whole premium associated with voluntary prepayment of the 2023 Class A-2 Notes was approximately $12.1 million and for the 2025 Class A-2 Notes was approximately $29.8 million. We also would be subject to a make-whole premium in the event of a mandatory prepayment required following certain rapid amortization events or certain asset dispositions.

Capital Allocation

Dividends

During the three months ended March 29, 2026 and March 30, 2025, we declared and paid dividends of $2.5 million and $7.8 million on common stock as shown in Note 8 - Stockholders' Deficit, of the Notes to the Condensed Consolidated Financial Statements. On February 20, 2026, our Board of Directors declared a first quarter 2026 cash dividend of $0.19 per share of common stock, payable on April 10, 2026 to the stockholders of record as of the close of business on March 18, 2026.

Share Repurchases

On February 17, 2022, the Company's Board of Directors authorized a share repurchase program, effective April 1, 2022, of up to $250 million (the "2022 Repurchase Program"). A summary of shares repurchased under the 2022 Repurchase Program, during the three months ended March 29, 2026 and cumulatively, is as follows:

(In millions)

From time to time, we also repurchase shares owned and tendered by employees to satisfy tax withholding obligations on the vesting of restricted stock awards. Shares are deemed purchased at the closing price of our common stock on the vesting date. See Part II, Item 2 of this Form 10-Q for detail of this stock repurchase activity during the three months ended March 29, 2026.

Adjusted Free Cash Flow

We define "adjusted free cash flow" for a given period as cash provided by operating activities, plus receipts from notes and equipment contract receivables, less additions to property and equipment. Management uses this liquidity measure in its periodic assessments of, among other things, the amount of cash dividends per share of common stock and repurchases of common stock. We believe it is important for investors to have the same measure used by management for that purpose. Adjusted free cash flow does not represent residual cash flow available for discretionary purposes.

Adjusted free cash flow is a non-GAAP measure. This non-GAAP measure is not defined in the same manner by all companies and may not be comparable to other similarly titled measures of other companies. Non-GAAP measures should be considered in addition to, and not as a substitute for, the U.S. GAAP information contained within our financial statements. Reconciliation of the cash provided by operating activities to adjusted free cash flow is as follows:

(In millions)

The decrease in adjusted free cash flow for the three months ended March 29, 2026 compared to the same period of 2025 was primarily due to the increase in additions to property and equipment and the decrease in cash provided by operating activities as discussed above.

Contractual Obligations and Commitments

There were no material changes to the contractual obligations as disclosed in our Annual Report on Form 10-K for the year ended December 28, 2025.

Critical Accounting Estimates

A discussion of our critical accounting policies and estimates and the related assumptions used in their application is included in Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K for the year ended December 28, 2025.

There were no material changes from the information contained in the Company’s Annual Report on Form 10-K for the year ended December 28, 2025.

Disclosure Controls and Procedures

The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of the end of the period covered by this report. Based on such evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, the Company’s disclosure controls and procedures are effective at the reasonable assurance level.

Changes in Internal Control Over Financial Reporting

There have been no changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

There are no material changes from the risk factors set forth under Item 1A of Part I of the Company’s Annual Report on Form 10-K for the fiscal year ended December 28, 2025.