The Rise and Fall of Applebee’s
Here is the video from this transcript: YouTube
Let’s flip through a phonebook to find a name. Hmm…. Appleby. That sounds good. But it has already been copyrighted. What about Cinnamon’s and Pepper’s? Already taken as well. How about modifying Appleby to Applebee? That’s when Bill and TJ Palmer settled on a name for their restaurant. Note that the full name they settled on was T.J. Applebee’s Rx for Edibles & Elixirs.
However, after only 3 years, in 1983, the duo sold the business to W. R Grace and Co., who then then changed the name to Applebee’s Neighborhood Grill & Bar in 1986. Two years later, franchisees Abe Gustin and John Hamra purchased the rights to Applebee’s concept from W.R. Grace. And this might have been the best decision they have made.
As they opened the 100th restaurant in Nashville, Tennessee, Applebee’s International Inc. completed an IPO in 1989. The business was performing so well that in 1990 it was selected by Barron’s as a small company with a five-year high growth potential backed by its management strategy.
The secret sauce lied in Applebee’s focus on being your friendly neighborhood restaurant. The theme was made so that it projected a neighborly and warm environment. Menu covers would read “Welcome to the Neighborhood”. The crux of the strategy was to attract and retain local customers. The whole idea was to make people walk out of the restaurant without feeling they had left their wallets behind them.
It was also franchisor-friendly in that franchisers could hand-pick items on their menu, although all of them needed to serve the chain’s signature riblets, fajitas and apple margaritas. Franchisers could also tailor their décor to their local culture.
Needless to say, in the 1990’s the chain continued to grow at more than 100 restaurants annually. And in 1995, Applebee’s upped its game by acquiring Rio Bravo Cantina Mexican food chain for 68 million dollars. At first, that seemed like a good idea as they thought that the chains could complement each other. Although they were the first casual dining chain to open 1,000 locations that helped revenue grow to 2.35 billion dollars by 1999, Applebee’s sold Rio Bravo to Chevys for 58 million dollars as it was not meeting expectations.
But that did not impact their growth plans. In the early 2000’s, Applebee’s decided to take the chain on the international scene by opening restaurants in Latin America and the Middle East. And in order to attract local customers, Applebee’s made tweaks to menus and designs to fit the local culture. For instance, they serve beef ribs instead of pork in the Middle East.
Over time, more and more customers became conscious about their health and decided to include more healthy meals as part of their diet. Seeing the rise of the trend, Applebee’s made a commitment to improve their healthy offerings by partnering with Weight Watchers in 2004. That might have been the first time a food chain included a weight-loss program in its menu.
Applebee’s was on an okay growth trajectory in 2007 when it was acquired for 2.1 billion dollars by The International House of Pancakes Corp., which rebranded to Dine Brands. The new management wanted to focus on driving operational improvements aimed at re-energizing Applebee’s system performance. The changes were expected to result in increasing cash flow over time, which would be used to initially reduce debt incurred in connection with the acquisition.
The chain unveiled a revitalization concept in 2010 that called for remodeling interiors and exteriors, service improvements and new food and drinks selections. However, that only worked until 2015. Franchise restaurant sales increased from 3.5 billion dollars in 2010 to 4.7 billion dollars in 2015.
After that, they were having trouble attracting millennials, which now formed a larger part of the target market. They closed 99 locations in 2017 and closed 106 more in 2018. Millennials were attracted toward fast casual chains such as Chipotle instead of the casual dining places. Moreover, meal delivery kits such as Blue Apron were gaining traction as millennials gravitated to cooking healthy meals at home as well.
The parent company hired a new CEO who brought in fresh ideas on how to revitalize the fading brand. And this is when Applebee’s introduced the Dollarita, their 1-dollar margarita. Great initiative but all of their plans not only failed to attract millennials but also confused their core customers. Revenues dipped from the high of 4.7 billion dollars to 4 billion dollars in 2019.
Over the years, Applebee’s used various slogans. “It’s a Whole New Neighborhood”, “There’s no Place like the Neighborhood” and “Eatin’ Good in the Neighborhood”. We are not a huge fan about these slogans. At least they are consistent about putting the word Neighborhood in them. We’ll give them that.
Nowadays, Applebee’s has around 1,700 restaurants worldwide, down from around 2,000 a few years back. Dine Brands is trying to find salvation on the international scene. They announced that they will open the first Applebee’s restaurant in India in late 2020 and plans to open at least 9 additional ones in the next few years.
What do you think about Applebee’s? Have you ever eaten at one of their restaurants? What could they be doing better? Let us know.
