Family chain wants apple pie status



Applebee's replaced much of its menu and upgraded its advertising.
OVERLAND PARK, Kan. (AP) -- With more than 1,600 restaurants across the country, Applebee's International Inc. has made good on a decade-long plan to become the world's biggest casual dining chain.
Now the company wants to replace quantity with quality.
Better food, improved service and sharper advertising are the tools the Overland Park, Kan.-based chain says it is using to win not just market share and real estate but its own spot in diners' consciousness.
"It's our intention and our mission to become part of the American culture," said Lloyd Hill, Applebee's chairman and chief executive officer. "To become what some call the 'third place.' There's work, there's home and there's the 'third place.' For some people, it's church; for some, it's Starbucks; for some, it's Applebee's."
Living up to potential
Customers are already seeing changes. The company, seeking to improve its reputation for consistent but pedestrian food, tossed out three-fourths of its menu and took popular but seasonal items, such as baby back ribs, and made them permanent fixtures.
Applebee's has a loyal customer base on which it wants to build. It currently ranks first among casual dining chains in terms of systemwide sales at $3.5 billion and ranks sixth in terms of sales per restaurant at $2.3 million.
Investors are upbeat about the company -- its stock reached an all-time high of $28.55 this year and is now trading in the $26 range in a difficult atmosphere overall on Wall Street.
Malcolm Knapp, president of New York-based Malcolm Knapp Inc., a restaurant consulting firm, said Applebee's management realized they should begin acting like the big company they had become.
"In the last four years, there's been a palpable shift in the quality of operations, the quality of food, the quality of advertising and the sophistication of advertising," Knapp said, noting that the chain's television ads have played up the "neighborhood" angle of the restaurants that often incorporate local heroes, sports teams and landmarks into the decor.
"At this point, they have the best advertising in casual dining."
Focus on food
In addition to its menu overhaul, this spring Applebee's began serving a collection of items developed with the help of Weight Watchers, a diet regimen with more than 3 million devotees.
"It's really a refocusing on the core driver in a restaurant, which is the food," said Andy Barrish, an analyst with Bank of America Securities.
This year also has seen the full rollout of the company's Carside To-Go service, which delivers takeout orders to customers in their vehicles. While competitors Outback Steakhouse and Chili's pioneered similar takeout service, Hill said, Applebee's should get a bigger bounce from it because its locations are typically closer to residential areas.
Chain formation
Applebee's was started in 1980 by two Atlanta brothers, Bill and T.J. Palmer, who originally named the concept T.J. Applebee's Rx for Edibles & amp; Elixirs. They sold the concept in 1983 to W.R. Grace and Co., which in turn sold it in 1988 to Abe Gustin and John Hamra, a pair of Kansas City businessmen with a good track record as Wendy's franchisees.
The company went public in 1989.
Currently, 75 percent of Applebee's restaurants are owned by franchisees. By contrast, competitors such as Darden, owner of Red Lobster and Olive Garden, and Brinker International, owner of Chili's, either don't franchise or own a larger percentage of their stores.
Each Applebee's restaurant contributes to national and local marketing pools that this year have given the chain $130 million in advertising muscle. Analysts say that kind of spending has contributed to Applebee's growth.
In the future, Applebee's doesn't plan to give up on growth, although Hill has set a ceiling at 2,300 restaurants.

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