IHOP Corp. chairman and chief executive Julia A. Stewart is poised to lead the country’s largest casual-dining brand, Applebee’s Neighborhood Grill & Bar, with her company’s pending $2.1 billion purchase of the chain’s Overland Park, Kan.-based parent. If the acquisition is consummated, Stewart would lead a combined company that operates or franchises 3,262 restaurants and posts systemwide sales of $6.8 billion, making it one of the largest restaurant companies in the industry.
The deal, which requires shareholder approval, is a bold move, some industry observers say, especially because the turnaround that IHOP envisions for Applebee’s is far from certain. Applebee’s, like many of its casual-dining peers, has struggled with declining consumer traffic and rising costs for almost two years, which has led to a string of negative same-store sales results and decreasing profit.
Stewart and her team at IHOP think they can turn Applebee’s around through refranchising efforts, reduced spending, improved operations and a focus on brand positioning. It is the same formula Stewart employed at IHOP beginning in 2001. She and her team restructured the business and placed an emphasis on brand efforts, which led to improved financial results.
Stewart says her history with Applebee’s—she was domestic president from 1998 to 2001—will be “a benefit to the combined companies both in terms of my familiarity of Applebee’s operations as well as my relationship with its franchisees.”
What makes you confident you can turn Applebee’s around?
Because we’ve done it, I really do believe we can do it again. We have done the exact same things at IHOP: restructured the business model and re-energized the brand. That’s some heavy lifting, but we feel confident.
Other than financial moves, what are some of the first steps you plan to take with Applebee’s?
FAST FACTS AGE: 51EDUCATION: bachelor’s degree, San Diego State UniversityEXPERIENCE: various roles at Applebee’s, Taco Bell, Stuart Anderson’s Black Angus and Cattle Company Restaurants, Spoons Grill & Bar, Burger King, and Carl’s Jr. RestaurantsPERSONAL: married, two children
The Applebee’s brand has a lot of upside. It is not a broken brand; it just needs to be re-energized. Obviously, we’ll look at advertising. I want to make certain that there is a clear and agreed-upon definition of the brand.… We need a clear definition for that. Everything you do, including the service platform, will revolve around that, so it is just critical. We really need to spend time on that, and we will.
What are the synergies between the brands?
We saw Applebee’s as an opportunity for us to really use our proven capabilities and increase the long-term value [of IHOP stock] for shareholders. Certainly there are some synergies and clearly some opportunities on the cost and support side. I feel strongly that operations, marketing, and research and development be stand-alone divisions and stay with the brand. We really need to see what makes sense and be thoughtful, diligent and deliberate to figure out what’s in the best interest.
Why did you leave Applebee’s, and how do you feel about returning?
I really wanted to be CEO [at Applebee’s], and that wasn’t going to happen any time soon, and that really was my hope and dream. Along came IHOP and said, “We want you to do that for us”…and everything has a way of working out, I guess. I really am tickled pink. But this acquisition is about [IHOP’s] business strategy first articulated in January 2006, when we said we were looking for a purchase. The board has been incredibly supportive and always said, “If you can find the right thing, then absolutely.” I’m really proud that we stuck to our discipline through this.… We did a tremendous amount of due diligence.
