The largest Applebee’s franchisee, Apple American Group, is acquiring an additional 99 locations of the casual-dining chain from a Poland-based franchise group, AmRest Holdings, for a total of $94.8 million.
Last week, the companies closed a deal on 97 of the restaurants for $91.6 million. In addition, AmRest said in public findings that it expects to sell two more restaurants to Apple American for another $3.2 million in a transaction that's still pending.
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In 2008 AmRest bought a majority stake in the Applebee’s franchise group Apple Grove Holdings, which at the time operated 104 restaurants, according to AmRest’s filings. The Wroclaw, Poland-based public company also operates Pizza Hut, KFC, Starbucks, Burger King and its in-house developed La Tagliatella brand restaurants, primarily in Central and Eastern Europe.
As a result of the deal, Apple American could become the nation’s largest franchise operator with a unit count of 436 Applebee’s and annual sales projected to top $1.1 billion, said Greg Flynn, Apple American’s founder, chair and chief executive. In addition, Apple American would also operate restaurants in 23 states.
The franchise operator credits its success to a decentralized business model in which each geographic region is led by a market president who is given local autonomy with administrative and financial support from the central franchise organization.
Flynn said his focus will be on running existing restaurants well, but he remains open to more growth, saying his goal is to be “the premier franchise group.”
About one-third of the AmRest restaurants have been remodeled, Flynn noted, but Apple American plans to reimage the remaining locations by the end of 2014. In addition, Apple American is on track to complete remodels for about 100 units left within its own portfolio by that time. The reimaging has given Apple American locations a sales lift of about 5 percent on average, said Flynn.
The 2,018-unit Applebee’s chain has been undergoing a revitalization since parent company DineEquity Inc., based in Glendale, Calif., acquired the brand in 2007.
DineEquity, which also owns sister brand IHOP, earlier this month said it has completed a refranchising plan to convert the chain to a 99-percent franchise-owned brand. Over the past four years, the company has sold 479 domestic company-operated locations. Apple American now operates 21 percent of the chain’s units.
Last year, Apple American received a “strategic growth investment” from Goldman Sachs Capital Partners, which joined existing investment partner Weston Presidio, and members of the management team who also maintained a significant ownership position.
Flynn said his increased investment in the brand indicates its success. “I’m betting with my feet,” he said. “Life is good in the ‘hood.”
Contact Lisa Jennings at lisa.jennings@penton.com.
Follow her on Twitter: @livetodineout