IHOP's name change is a gimmick to increase restaurant traffic: Analyst

Key Points
  • IHOP reveals the meaning behind the new name "IHOb": The "b" stands for "burgers."
  • "This is a measure that's being done to increase the afternoon and evening traffic," says Stephen Anderson of the Maxim Group.
  • More than 50 percent of the restaurant chain's traffic comes from breakfast items, Anderson says.
  • But the burger business is a fast-growing segment, increasing more than 3 percent a year.

IHOP changed its name to IHOb last week in a move that confused customers.

While many loyal pancake lovers thought the "b" might mean "brunch" or "breakfast," the restaurant chain announced on Monday that the "b" actually stands for "burgers."

"Changing the name, even if it's a little bit gimmicky, does bring traffic and attention to the stores," Stephen Anderson of the Maxim Group told CNBC on "Closing Bell" Monday.

But the name change isn't permanent. The same day the meaning behind the "b" was revealed, the chain restaurant announced in a press release that the move was "just for the time being." The marketing strategy will promote the seven new burgers that the restaurant is adding to its menu.

Meanwhile, signage at the company's flagship restaurant in Hollywood, along with its Twitter handle, have been changed to reflect "IHOb."

The company tweeted about its new name as well.


"This is a measure that's being done to increase the afternoon and evening traffic," said Anderson, an equity research analyst at Maxim.

He pointed out that the pancake house is well known for its morning fare, with more than 50 percent of its customer base coming in for breakfast items.

"They're not about to advance in that business," he said.

"It's the people who come in after 11 a.m., who may not necessarily want a Rooty Tooty Fresh 'N Fruity," Anderson said of a popular pancake offering at the restaurant. "They want something else. Burgers and sandwiches are very close to what IHOP has done traditionally."

The International House of Pancakes has actually been serving burgers since 1958 when the restaurant first opened — although most people don't realize it.

And the burger business is a fast-growing one, increasing about 3 percent to 3.5 percent a year.

"This is where IHOP is staking its claim to get more incremental traffic," Anderson said. And "IHOb" might be a clever way to do it.

In fact, this tactic has been done before — and it worked. In 2008, Pizza Hut, owned by parent company Yum Brands, temporarily changed its name at select U.K. locations to "Pasta Hut," in an effort to promote its pasta dishes.

"It met with similar mixed opinion, but in the 12 months after they used [the name] "Pasta" they had sales increase by 1½ percent," Anderson said.

Dine Brands, parent company of IHOP, rose more than 2.5 percent Monday.