Applebee’s Is Playing with Fire With $75 Million Menu Overhaul

A dramatic change in how it cooks food in all 2,000 restaurants. · Fortune

Over a year ago, DineEquity Chief Executive Julia Stewart found herself in the casual restaurant operator’s Kansas City, Mo., test kitchen presented with two options: Steak made on Applebee’s traditional gas-powered grill and steak cooked on a wood-fired grill.

Stewart unequivocally preferred the steak grilled over the open fire. “I couldn’t believe it,” she said. “I got hooked.”

But Stewart wasn’t sure that it was feasible for Applebee’s to change how it prepares steaks across all roughly 2,000 restaurants. “I remember saying, ‘Come on guys. You are in the test kitchen and everything is perfection,'” Stewart tells Fortune. She recalls asking: “How am I going to duplicate this?”

Now, DineEquity , parent to Applebee’s and IHOP, is going to try. Over the past few months, the company’s franchisees have removed the traditional gas grills that have become an industry standard and replaced them with new wood-fired grills across every single Applebee’s location across America.

The move is so bold it will change the taste and flavor profile of 40% of the items on Applebee’s current menu. Executives say it is the most significant initiative in the brand’s 36-year history. Burning American oak under a grill top will add a smoky flavor to not only steaks, but also salmon, chicken and pork. Any dish featuring those proteins - including a variety of salads - will have a different taste.

The investment, which includes advertising spending, totals $75 million, according to DineEquity.

“No matter how you slice it, it is a big bold move,” Stewart said. “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.”

Applebee’s could certainly use a hit. The chain’s U.S. systemwide same-restaurant sales have slipped for three consecutive quarters, including a 3.7% drop in the most recent period. Same-restaurant sales have underperformed sibling brand IHOP for three years. Casual dining chains like Applebee’s have broadly faced a threat from the increased popularity of fast-casual rivals like Chipotle and Panera , which offer food that consumers believe is healthier fare than quick-service restaurants but without the table service offered at concepts like Applebee’s.

Broadly, fast-casual chains are reporting far stronger sales of late. Research firm Technomic estimates that sales grew 11.5% at fast casual restaurants in 2015 from the prior year, while casual dining only posted a 3.5% increase. Total U.S. restaurant sales were up 5% across the entire industry. Applebee’s admits it lagged the overall casual dining segment last year.