IHOP to acquire Applebee's franchise


Nov 08, 2007

IHOP Corp. (NYSE: IHP) today announced that, upon the close of its acquisition of Applebee's International, Inc. (NASDAQ: APPB), it plans to realign its organizational structure consistent with the Company's strategy to franchise a substantial majority of Applebee's company-operated restaurants. The new organizational structure is expected to more effectively support two highly franchised restaurant brands, provide for strong marketing and operations leadership, leverage shared functional areas to deliver operational and financial synergies, and drive immediate and meaningful cost savings.

"We will have two robust business units devoting full attention to our first priority, delighting IHOP and Applebee's guests, while the parent company facilitates the sharing of appropriate services," said Julia A. Stewart, Chairman and Chief Executive Officer of IHOP Corp., who will lead the management team of the combined companies. "In addition to my role as CEO of our parent company, over the next several months I plan to devote a substantial portion of my time to the day-to-day management of the Applebee's business unit as I work with our new leadership team to re-energize and differentiate the Applebee's brand."

Parent Company to Deliver Operational Synergies

By harnessing the extensive experience and industry knowledge of the Applebee's and IHOP executive teams, the Company plans to integrate a range of functional areas to support each brand more effectively and efficiently. These areas include Finance, Legal, Information Technology, Supply Chain, Quality Assurance, and Human Resources for the benefit of the entire enterprise. The Company believes that these disciplines can be effectively shared to better support the franchisees and restaurant operators without impacting the unique positioning of each brand.

Stewart said, "Our focus at the corporate level will be to leverage our proven core competencies -- optimizing a highly franchised business model, controlling General and Administrative expenses and re-energizing brands -- to foster and support sales growth and operating profitability within each business unit."

Aligning Applebee's for the Future

As previously announced, IHOP Corp. intends to franchise a large majority of Applebee's company-owned restaurants as it transitions the brand to a highly franchised system. Accordingly, the Company plans to streamline Applebee's leadership team to 10 members from its current 21 member team over time as it remakes Applebee's into a nearly 100% franchise organization. The Company plans to retain or promote many of Applebee's key executives to lead functional areas including Marketing, Operations, Finance, Legal, Development, International and Human Resources. A total of eight executives, including Applebee's President and Chief Executive Officer, Dave Goebel, and Steve Lumpkin, Executive Vice President, Chief Financial and Strategy Officer, will depart the Company at the close of the transaction.

"I want to express my appreciation to Dave Goebel and Steve Lumpkin for their professionalism, leadership and good counsel as we jointly worked to develop the new organization structure. I wish them both much success in the future," said Stewart.

Limited Changes at IHOP Business Unit

Minimal leadership changes are expected at the IHOP business unit in part because the brand has already optimized its highly franchised business model over the past several years. Some executive changes reflect the decision to develop a shared services framework for the benefit of both restaurant brands while IHOP's Marketing and Operations leadership remains unchanged.

Next Steps

IHOP Corp. has engaged an executive search firm and is actively seeking a President for each business unit. Once on board, the Presidents of the IHOP and Applebee's business units will report directly to Ms. Stewart. Additionally, the Company is currently working to align director and associate level resources at Applebee's as appropriate with its leadership changes announced today.

"We look forward to successfully closing the transaction later this month and to quickly integrating the two businesses into a new, more efficient operating structure," said Stewart. "We have a lot of work ahead of us and are excited to get started and capture the significant growth opportunities that exist for both IHOP and Applebee's."

The transaction is expected to close by November 29, 2007, subject to satisfaction or waiver of additional customary closing conditions set forth in the merger agreement. Following the closing, Applebee's will operate as a wholly owned subsidiary of IHOP Corp.