Apple South 2Q profit up 32%; company seeks new concept

Nation's Restaurant News, Sept 16, 1996

MADISON, Ga.--Apple South Inc. came rolling back from a quarterly loss early in 1996 with a profitable performance in its second quarter and first six months and a report that it is in the market for a new acquisition to replace its shuttered Tomato Rumba's division.

In the first half ended June 30, Apple South posted earnings of $4.29 million on sales up 32 percent, to $263.28 million from $199.2 million, in the six-month period of 1995. Earnings for the comparable 1995 period were $12.81 million.

Though the six-month earnings were down from the comparable period in 1995, second-quarter profits easily overcame a first-quarter drop when the company reported a net loss of $5.49 million on sales of $126.33 million.

For the second quarter Applebee's largest franchisee reported earnings of $9.78 million, a 32-percent gain over comparable-period earnings in 1995. Sales grew 27 percent, to $136.95 million from $108.13 million.

Citing the uncharacteristic early-year downturn primarily attributable to a $19.8 million writedown for the shuttering of its Tomato Rumba s concept, Apple South chairman Tom E. DuPree Jr. told investors at a conference in New York this month that the company is back on track and "playing to our strengths."

In a presentation at the J.P. Morgan Securities conference, DuPree said the main expansion focus would concentrate on its Applebee's and Don Pablo's concepts, which together are on target to open 68 new restaurants through this year. At the end of the six-month period the company had 205 Applebee's, 52 Don Pablo's and 12 Harrigan's.

Of Applebee's, he said, "No one in the industry has a box as economically competitive as we have" with average-unit volumes of $1.9 million, operating margins of 20 percent and cash-on-cash returns of 31 percent.

The Don Pablo's Mexican concept, he said, was "opening in new markets at record sales volumes" and average-unit volumes as a whole up 10 percent in the first half, to about $2.4 million.

The company also is looking to acquire another "concept proven in multiple markets," DuPree said. He stressed that the acquisition would have to provide Apple South with a "leadership opportunity in niche midscale American, seafood, Southwest or steaks" concepts and show a 30-percent return on investment.