DineEquity Inc. has officially completed its plan to convert the Applebee’s chain into a 99-percent franchised brand, the company announced Thursday.
The announcement follows closure of a previously announced deal to refranchise 39 Applebee’s in Virginia to Potomac Family Dining Group LLC, the final of a series of deals that have shifted 479 domestic company-operated locations to franchise ownership over the past four years.
Glendale, Calif.-based DineEquity, also parent to the IHOP chain, acquired Applebee’s in 2007. At the time, DineEquity chair and chief executive Julia Stewart pledged to refranchise the casual-dining chain, arguing that the franchise business model is less capital-intensive and experiences less volatility in cash flow performance compared with company-owned restaurants.
“We are extremely excited to have reached this significant milestone by accomplishing what we set out to do when Applebee’s was acquired,” said Stewart in a statement. “We are enthusiastic about our future as a fully franchised restaurant company.”
In the past, the company has said it intended to hold on to 23 Applebee’s restaurants in test-market locations.
The shift away from company-owned locations has also allowed for efficiencies between the two brands that earlier this year resulted in the loss of about 100 positions within the company. The consolidation was expected to result in annualized savings of $10 million to $12 million, the company said during its most recent earnings report.
DineEquity has also been working to revitalize the 2,018-unit Applebee’s brand by changing about 90 percent of the menu and remodeling U.S. locations.
Though Applebee’s domestic systemwide same-store sales rose a modest 0.7 percent in the second quarter, analysts are projecting stronger results for the company’s next earnings report. A recent report from Wall Street analyst Mark Kalinowski of Janney Capital Markets projected a better-than-expected same-store sales increase of 3 percent for the third quarter, citing “channel checks.”
Kalinowski said late night continues to be Applebee’s fastest-growing daypart, “an effort likely only to be more enhanced by the recent nationwide rollout of the ‘bee’s Late Night initiative,” for which Applebee’s takes on a more club-like atmosphere with appetizer deals and karaoke.