FDD Talk 2020: Applebee’s Franchise Review (Financial Performance Analysis, Costs, Fees, and More)

In this FDD Talk 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 2020 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 2020 FDD

• Section IV – Number of franchised and company-owned Applebee’s outlets at the start of the year and the end of the year for 2017, 2018, and 2019, based on Item 20 of the company’s 2020 FDD

• Section V – Presentation and analysis of Applebee’s financial performance representations, based on Item 19 of the company’s 2020 FDD, including information on the:

• 2019 average and median weekly sales for the 1,664 franchised and company-owned Applebee’s restaurants that were in operation for the full fiscal year 2019

Section I – Background Information

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

Gives Away 1.6 Million Boneless Wings

1.  At the end of January 2020, Applebee’s announced that it was giving away 1.6 million Classic Boneless Wings to fans nationwide on February 2, just in time for the Super Bowl. Applebee’s Classic Boneless Wings are tossed in Classic Hot Buffalo sauce and served with ranch dressing and celery on the side.

2.  To claim the free Boneless Wings, customers had to visit Applebees.com or the Applebee’s mobile app on Sunday, February 2 to order online for delivery. After ordering menu items totaling at least $40 and applying the promo code FREEWINGS at checkout, 40 Classic Boneless Wings were added to customers’ carts.

3.  Joel Yashinsky, chief marketing officer of Applebee’s, said, “Hands down, our fans can’t get enough of our Boneless Wings, which is why we’re giving away up to 1.6 million of them on game day! That’s right, you can get your free order of 40 Classic Boneless Wings delivered right to your door along with your $40 Applebees.com or mobile app order wherever you happen to be watching the game on Sunday, February 2.”

Re-Opens with a Safety First Dining Experience

4.  As restaurants around the U.S. began re-opening as rules surrounding the COVID-19 pandemic were relaxed, Applebee’s announced in late May 2020 that it made several changes to keep customers and its team members safe. The changes include the following:

• Team members are maintaining a 6-foot distance at all times inside and outside the restaurant.

• Social distance spacing markers are visible on the sidewalks outside of the restaurant and throughout the restaurant.

• Guests can join a waitlist via app or host stand, and the restaurant will let them know when their table is ready. Waiting areas only allow for limited to no seating to adhere to social distancing.

• In good weather, there is oftentimes an External Greeter welcoming guests back and managing social distancing in the parking lot, sidewalk, and main entrance.

• In restaurants where there is an inside door, it is now propped open, so guests don’t have to use the door handle.

• Once inside, the host will seat guests, maintaining a 6-foot distance at all times.

• Dining rooms and bars are operating at reduced capacity seating and are properly marked.

• The number of parking spaces have been increased to take care of guests who prefer pick-up or delivery.

• In each restaurant, a dedicated Team Member is following strict and regimented cleaning, disinfecting, and sanitizing procedures throughout the day with a laser-focus on high-touch surfaces. These surfaces include railings, doorknobs, window ledges, booths, tabletop payment and menu devices, phones, credit card machines, pens, check trays, highchairs, and more.

• Restrooms are deep cleaned and disinfected 3 times a day, with routine 30-minute check-ins.

• Team Members and Managers are wearing face coverings and following all state or local guidance on gloves.

• There are reduced touch points throughout the dining experience.

• Applebee’s now offers single-use, disposable menus, or if guests prefer, they can access the menu on their own device at Applebees.com. In 98% of restaurants, guests can also access the menu on a tabletop device that is disinfected after each use.

• Throughout the meal, team members have no bare hand contact with any guest-facing items, including IDs, credit/debit cards, pens, plateware, glassware, silverware, menus, etc. Garnishes are placed on beverages using tongs or plastic barriers.

• Also, in those 98% of restaurants with the tabletop device, guests can use it to pay directly at the table. And many of these devices also allow for even more enhanced contactless options including Samsung Pay, Google Pay, Apple Pay, and tap to pay vs. a swipe.

• With a safety-first mindset, Applebee’s is following CDC and FDA guidelines as well as local and state mandates for all enhanced health and safety measures.

• All Team Members and Managers have been trained in new protocols to keep teams and guests safe.

• All locations have a wellness-check process in place to confirm Team Members are healthy and meet requirements to work. State and local requirements are followed when it comes to specific check-in questions or taking temperatures.

• Hand sanitizer is readily available throughout the restaurant for Team Members and guests.

• Team Members adhere to a strict and frequent hand washing process with soap and water and alcohol-based hand sanitizer, which are reported by the CDC as the most effective methods at preventing spread of germs.

• Team Members must continue to wash hands properly before putting on new gloves.

• Glove changing is required following any exchange of items between guests and a Team Member, such as credit cards, cash, pens, trunk or car doors, or change in activity going from unclean to clean, such as sweeping or adjusting facial coverings, etc.

Reintroduces Irresist-A-Bowls

5.  At the beginning of July 2020, Applebee’s reintroduced Applebee’s Irresist-A-Bowls as the official entrée to welcome guests back into dining rooms across the country. The bowls were initially launched in late January earlier this year. The Irresist-A-Bowls were available for a limited time.

6.  Each Irresist-A-Bowl came overflowing with mouthwatering flavor, including the Southwest Chicken Bowl, with the option to upgrade to steak, featuring mixed greens and cilantro rice, topped high with house-made pico de gallo, black bean corn salsa, and guacamole. The return of the Tex-Mex Shrimp Bowl was also featured on the menu, as well as the Homestyle Chicken Bowl, which was served with breaded pieces of tender boneless chicken.

7.  Joel Yashinsky, chief marketing officer of Applebee’s, said, “We are excited to ‘Welcome Back’ guests with three great new Irresist-A-Bowls all featured at $7.99. Whether in our restaurants, through Applebee’s To Go or by Delivery, all of our guests can enjoy these three delicious and abundant bowls. From the zing of our Southwest Chicken Bowl to the tasty sensations in our Tex Mex Shrimp Bowl or the delectable crunch of our Homestyle Chicken Bowl, there’s something for everyone to enjoy.”

Company History

8.  Applebee’s was founded as T.J. Applebee’s Rx Edibles & Elixirs by Bill and T.J. Palmer in 1980 in Decatur, Georgia. The Palmers wanted to create a restaurant that had a neighborhood pub feel to it and could offer friendly service along with quality fare at a lower price than most of their competition. Following the success of the first location, the Palmers opened a second Applebee’s outside of Atlanta, Georgia.

9.  In 1983, the Palmers sold the company to W. R. Grace and Company. Under the deal, Bill Palmer remained with the company as president to help guide the transition. He went on to become an Applebee’s franchisee in 1985.

10.  W. R. Grace and Company renamed the restaurant to Applebee’s Neighborhood Grill & Bar and established Applebee’s International, Inc. as its franchisor in 1988. Over the next few decades, Applebee’s grew exponentially around the U.S. as well as internationally. By 2000, the chain had grown to 1,250 locations.

11.  In 2007, IHOP Corp. (now Dine Brands Global) acquired Applebee’s for $2.1 billion. Applebee’s continued to grow, but in recent years, beginning in 2017, the chain has been closing locations due to declining sales. As of December 2019, there were over 1,787 restaurants operating system-wide in the United States and 15 other countries.

Entrepreneur’s Franchise 500

12.  Applebee’s did not rank on Entrepreneur’s 2020 Franchise 500 list.

Section II – Estimated Costs

• Please click here for detailed estimates of Applebee’s franchise costs, based on Item 7 of the company’s 2020 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 2020 FDD.

Section IV – Number of Franchised and Company-Owned Outlets

Franchised

2017

• Outlets at the Start of the Year:  1,863
• Outlets at the End of the Year:  1,786
• Net Change:  -77

2018

• Outlets at the Start of the Year:  1,786
• Outlets at the End of the Year:  1,628
• Net Change:  -158

2019

• Outlets at the Start of the Year:  1,628
• Outlets at the End of the Year:  1,600
• Net Change:  -28

Company-Owned

2017

• Outlets at the Start of the Year:  0
• Outlets at the End of the Year:  0
• Net Change:  0

2018

• Outlets at the Start of the Year:  0
• Outlets at the End of the Year:  69
• Net Change:  +69

2019

• Outlets at the Start of the Year:  69
• Outlets at the End of the Year:  69
• Net Change:  0

Section V – Financial Performance Representations (Item 19, 2020 FDD) and Analysis

• The following sales information was derived from the sales at the 1,664 franchised and company-owned Restaurants that were in operation for the full fiscal year 2019.

• Of the 1,664 Restaurants included in this survey, 721 Restaurants (43.3%) 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.

• Some outlets have earned these amounts. Your individual results may differ. There is no assurance that you will achieve the stated results.

Weekly Domestic Unit Sales for the 52 Weeks Ended December 31, 2019