FDD Talk 2017: What You Need to Know About the Applebee’s Franchise Opportunity (Financial Performance Analysis, Costs and Fees)

In this FDD Talk 2017 post, you’ll learn the following:

• Section I – Background information on the Applebee’s franchise opportunity, including relevant news updates

• Section II – Estimated initial investment for an Applebee’s franchise, based on Item 7 of the company’s 2017 FDD

• Section III – Initial franchise fee, royalty fee, marketing fee, and other fees for an Applebee’s franchise, based on Items 5 and 6 of the company’s 2017 FDD

• Section IV – Presentation and analysis of Applebee’s’s financial performance representations, based on Item 19 of the company’s 2017 FDD, including information on the:

• 2016 average weekly sales for the 1,839 domestic franchised Applebee’s restaurants that were in operation for all the fiscal year 2016

Section I – Background Information

12 Things You Need to Know About the Applebee’s Franchise

Plans to Close Over 100 Locations

1.  In early August, Applebee’s parent company, DineEquity, said that it has plans to close up to 160 IHOP and Applebee’s restaurants. In the first quarter of 2017, DineEquity said that it would only close about 40 to 60 Applebee’s locations, but updated that number to around 105 to 135 in the August press release. Although over 100 stores will be closing, DineEquity plans to open 20 to 30 Applebee’s restaurants internationally.

2.  Several analysts agree that Applebee’s has been hit particularly hard by the downturn in the casual-dining segment. However, DineEquity believes that closing the restaurants will help in the long run. DineEquity’s interim CEO Richard Dahl said, “We are investing in the empowerment of our brands by improving overall franchisee financial health, closing underperforming restaurants, and enhancing the supply chain.”

3.  Dahl also noted that Applebee’s is in the middle of a “transitional year” and is “making the necessary investments for overall long-term brand health.” DineEquity declined to release a list of the Applebee’s locations it will be closing.

Brand Announces It’s Done Trying to Appeal to Millennials

4.  At the beginning of August, on the heels of a press release stating that it would be closing over 100 locations in the coming months, Applebee’s announced that it was done trying to appeal to millennial customers.

5.  The company said that it had made a mistake in trying to brand itself as a modern millennial hangout and that it would be reverting back to a more family-friendly chain. Applebee’s will be bringing back its all-you-can-eat specials and discounts like its “2 for 20” menu.

6.  Patrick Lenow, a spokesperson for DineEquity, said that many longtime regulars were unhappy with Applebee’s new menu and modern décor. Going forward, Applebee’s will be removing trendier items from its menu, such as a turkey sandwich with a sriracha chile lime sauce, and will instead be bringing back old favorites. Lenow declined to say what those items will be as Applebee’s “wouldn’t want to tip off [its] competitors.”

New Chief Culinary Officer

7.  At the end of August, Applebee’s announced that Stephen Bulgarelli will be joining the company as its vice president and Chief Culinary Officer. John Cywinski, Applebee’s president, said, “Chef Stephen possesses a unique balance of strategy, creativity, and team orientation that will elevate our menu and strengthen our culinary culture. All of this coupled with his passionate focus on our guests makes Stephen the ideal partner for our franchisees.”

8.  In his new position, Bulgarelli will lead Applebee’s culinary team as they start a new chapter of menu innovation that will focus on returning to the brand’s roots. The team plans to “elevate Applebee’s neighborhood position around familiar favorites with an emphasis on abundant, indulgent value.”

Company History

9.  Applebee’s was founded in 1980 by Bill and T.J. Palmer in Decatur, Georgia under the name T.J. Applebee’s Rx for Edibles & Elixirs. After opening a second locations, the Palmers sold the company to W.R. Grace and Company in 1983. As part of the transaction, Bill Palmer was named president of the Applebee’s Division and helped the company grow into a full franchise system.

10.  The restaurant chain’s name was changed to Applebee’s Neighborhood Grill & Bar in 1986. A few years later, Applebee’s International, Inc. became the chain’s franchisor when Kansas City franchisees Abe Gustin and John Hamra purchased the rights to the Applebee’s concept in 1988. Nearly two decades later, Applebee’s was acquired by IHOP Corp. for about $2.1 billion on July 16, 2007.

11.  After the acquisition, IHOP Corp. changed its name to DineEquity, and at the time, IHOP and Applebee’s combined to make the largest full-service restaurant company in the world. Today, there are about 2,000 Applebee’s restaurants in the U.S. and abroad.

Entrepreneur’s Franchise 500

12.  Applebee’s has not ranked on Entrepreneur’s annual Franchise 500 list in the past decade.

Section II – Estimated Costs

• Please click here for detailed estimates of Applebee’s franchise costs, based on Item 7 of the company’s 2017 FDD.

Section III – Initial Franchise Fee, Royalty Fee, Marketing Fee, and Other Fees

• Please click here for detailed information on Applebee’s initial franchise fee, royalty fee, marketing fee, and other fees, based on Items 5 and 6 of the company’s 2017 FDD.

Section IV – Financial Performance Representations (Item 19, 2017 FDD) and Analysis

• The following sales figure was derived from the sales at the 1,839 franchised Restaurants that were in operation for all the fiscal year 2016.

• Of the 1,839 Restaurants included in this survey, 830 (45.1%) attained at least the stated average sales.

• The financial results of your Restaurant may be directly affected by many factors, such as the Restaurant’s size, geographic location, weather, the effectiveness of your regional and local marketing efforts, the level of existing brand awareness and acceptance in the market, the presence of other competing Restaurants, and the quality of management and service at your Restaurant.

• Your individual results may vary substantially from the results stated in this financial performance representation. Some Restaurants have achieved this sales level. There is no assurance that you will do as well. If you rely upon these figures, you must accept the risk of not doing as well.

Average Weekly Domestic Franchise Unit Sales for the 52 Weeks Ended January 1, 2017