IHOP Corp. serves up $2.1b buyout offer for Applebee's: turnaround plans include activist investor Breeden's suggestions

Nation's Restaurant News, July 23, 2007 by Sarah E. Lockyer

Stewart and her team worked to change that through refranchising corporate locations, reduc ing costs and providing better support to franchisees. The company's systemwide sales jumped, its same-store sales turned positive--and still are--and IHOP no longer develops restaurants or lends to its franchisees.

"IHOP is no doubt qualified to run Applebee's, from its CEO with historical ties to the company, to its own successes in refranchising the IHOP business, turning a once-sleepy company into a stock up 30 percent over the past year," securities analyst John S. Glass at CIBC World Markets said in a research note.

IHOP's plans for Applebee's include a ceasing of corporate-restaurant development, the sale of corporate stores to franchisees, a sale-leaseback of owned real-estate assets, and a reduction in general and administrative and capital expenditure costs.

In addition, Stewart said she wants to develop a "crystal clear" understanding about Applebee's brand positioning through consumer and market research. Once a brand vision is agreed upon, Applebee's can move ahead with remodels, menu changes, advertising alterations and whatever else is needed to revitalize the concept, Stewart said.

The joint statement from IHOP and Applebee's did not address official management changes, but Applebee's current president and chief executive, Dave Goebel, said the Applebee's management team "looks forward to working with the IHOP management team during the transition period."

Stewart said it was too early to say which members of Applebee's staff would join IHOP, but she did say the brands would continue to "operate independently with dedicated marketing, operational, and research and development leadership."

Stewart said it was also too early to discuss whether any members of Applebee's board of directors would join IHOP's board.

slockyer@nrn.com