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Applebee's restaurant exterior Photo courtesy of Applebee's
Applebee's

An Applebee’s franchisee has declared bankruptcy

City National Bank of Florida claims the operator owes about $8.3 million in debt, while the franchisor claims a franchising agreement breach

Louisiana Apple, an Applebee’s franchisee with 14 locations in Kentucky, Oklahoma, Indiana, and Arkansas, has filed for Chapter 11 bankruptcy protection following a lawsuit issued by one of its creditors.

City National Bank of Florida alleges the franchisee owes about $8.3 million in debt dating back to September 2020, when an initial loan was made for $7.1 million. CNB claims Louisiana Apple “failed to make payments due since on or about July 28, 2023,” and entered into a forbearance and loan modification agreement earlier this year. That agreement expired in May and CNB alleges the franchisee has failed “and refused” to make any payments.

Parent company Applebee’s Bar + Grill got involved in July, filing its own lawsuit against the franchisee to terminate its agreement after the franchisee’s failure to pay royalties. CNB said Applebee’s and its franchisee have settled the case out of court and the company assigned those leases to another franchisee, SBG Apple Central. CNB claims that transfer of asset control violated its loan agreements, however, and has filed for receivership to protect its interests.

The bankruptcy filing was made to void or reverse the transfers. If approved, the franchisee could either liquidate or reorganize the restaurants’ assets and CNB could reclaim value from its agreement.

With this filing, Louisiana Apple joins a growing number of restaurant concepts – from Red Lobster and BurgerFi to franchisees of Arby’s, Dickey’s, and Pizza Hut – that have declared bankruptcy this year amid a challenging environment created by expensive debt and slowing sales and traffic. This case is particularly interesting, however, because there are just 31 franchisees in Applebee’s 1,500-plus-unit system.

Applebee’s has spent the past couple of years closing underperforming stores and has navigated negative same-store sales for a little over a year. Tony Moralejo came on board as president last year and has put a new strategy into place to eventually get back to growth, including smaller, more cost-efficient prototypes and a sharpened focus on growing average unit volumes. The chain has also ramped up its promotional offerings and recently entered into an agreement with the NFL. Parent company Dine Brands will report third quarter results on Nov. 6.

Contact Alicia Kelso at [email protected]

TAGS: Franchising
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