Applebee's - The Rise and Fall...And Rise Again

[Music] applebee's has been one of the largest casual dining restaurants in the world going back to the 1990s for decades now they've been serving up millions of dollars worth of their famous ribs and steak and wings and i'll stop because i'm guessing most of us have seen their menu i would describe applebee's as the classic middle tier restaurant if you want something a little classier than fast food but not quite as classy as a fancy steakhouse applebee's could be the answer you're looking for it may not be your favorite restaurant but it's friendly and reliable and there's typically one close by now if you're one of their many frequent customers you may have realized it already but it can still be upsetting to hear that applebee's has had some trouble the simplest way to express that is by looking at their number of locations they were looking very strong opening new ones at a record pace up until about 2006 when things started to level off then about 10 years later in 2016 things were looking worse than ever when they actually started downsizing by closing locations there are a lot of different things affecting this graph and i am saying that this is a rise fall and potential rise again because there have been some positive indicators throughout that time including reason to believe that things have been turning around as recent as 2018 applebee's has had five different owners throughout their history so i think it makes sense to take a look back at each one of them and highlight what was happening with the company during each of those periods starting with the original founders william palmer and his wife tj see william had graduated with a degree in marketing and management in 1972 and went on to spend the first eight years of his career working on the corporate end of burger king in various management roles by 1980 he felt that he knew the business well enough to leave his job so he can follow his ambition and start his own restaurant along with his wife and his original idea was very much like i already described to create something in that middle ground between fast food and fancy dining but possibly an even bigger way that he separated himself from the competitors was the attention to the atmosphere do you know how they have that slogan eaten good in the neighborhood [Music] well that was adopted later but it was based on these founding principles the palmers wanted their restaurant to feel customized and familiar and personal they gave it that local feel by decorating it with stuff from local sports teams and newspaper clippings they wanted the customers just to feel like they belong there in their own neighborhood restaurant oh and the original name of it you're gonna like this they first wanted to call it applebee but with a y at the end of it but we're disappointed to learn that the name had already been taken it was registered to someone else so they couldn't use it but they really liked applebee's so they changed the spelling of it to the one that we know but to make it even more different they stuck tj's name at the beginning of it but then the restaurant also had this random drugstore theme so the name they went with was tj applebee's rx for edibles and elixirs a crazy name but the concept was strong enough to attract customers and for the next three years it existed as one family-owned restaurant near atlanta georgia by 1983 from the way it sounds anyway william and tj weren't getting along as well and found it difficult to run the restaurant together i'm guessing that that was a big motivation for them to sell it to wr grace and company not an incredibly well-known name but they were larger and already owned some other restaurants they believed in the concept and were willing to invest their resources toward expanding it so over the next five years they used an area franchising model to grow the business to 54 locations and that means in return for a percentage of the revenue each franchisee would be given the rights to open their own applebee's locations in certain regions of the country ideally they would have enough money to open up a bunch of them and it proved to be an effective way to expand the applebee's brand in fact one of these franchisees was william palmer after selling the company he continued to operate locations around atlanta for almost 30 years and even after that continued working with applebee's as an advisor until his death in late 2020 from pancreatic cancer now i can't say i know the specific terms of these franchising deals but the issue was that they weren't able to work them out in a way where the company was profitable wr grace was losing money pretty much every year from applebee's which i have to think was a big motivation for them to sell it in 1988. the buyers were john hamra and abe gustin which made perfect sense because they had already been involved with applebee's camera was chairman of the board and gustin was another one of these franchisees that was busy operating six of his own applebee's locations and then there is a bit of a technical transfer to list here in 1990 applebee started to become publicly owned through the stock market hamra and gustin did remain in control for a while but they had an initial public offering to raise money to reduce some of the company's debts and this takes us to the period in the 1990s where they exploded in popularity they started the decade with around 100 locations and they ended it with over 1 000 through such a large scale they were able to make the business increasingly profitable and it's important to point out that even though they were operating all of these new locations they were sure to stick to that original concept by striving to maintain that neighborly atmosphere they allowed decisions to be made at the restaurant level as far as how to decorate and even what food they served the company would put out these lists of approved menu items and said that 65 of the menu had to be from the list of core items like fajitas and ribs while the remaining 35 percent can come from the second list that included various local favorites so even though applebee's had turned into the type of large chain restaurant from which william palmer was initially trying to separate himself they never completely felt like one the concept continued to be successful well into the 2000s but most of the numbers suggest that things started to go bad in the years leading up to 2006. a few things that provide evidence to that is their income started falling while their comparable store sales weren't growing as fast even turning into the negative by that year a quick and obvious explanation for all of this could be the economic factors that were harming most of their industry at the time but it's leading me to their final and possibly most notable change of ownership in 2007 ihop bought applebee's for 2.1 billion dollars they had to go pretty deep into debt to do it too because having over 1900 locations applebee's was actually larger than ihop i have to go a little deeper here because there were some pretty cool circumstances motivating this deal mainly the ceo of ihop julia stewards there was already a motivational story there and this was adding another layer to it see as a teenager julia stewart had worked as a waitress at ihop and now decades later in 2003 she returned to the company as their new ceo when she first arrived ihop was having trouble and it was her turnaround plan that helped bring them back right away they started their new slogan come hungry leave happy but the core of the plan was to sell all of the ihop restaurants that were owned by the company and transform it into pretty much an entirely franchised model no longer owning those locations improved their cash flow it removed them from the risks of the real estate market and it allowed them to place more focus on the food in the restaurants themselves this goes even deeper and i hope we're all following this before julia stewart had accepted that job as ceo of ihop she had already worked for applebee's as the president of their domestic division when she was denied the position of appleby's ceo that she felt she deserved she chose to leave the company and accept the position at ihop so in 2007 when applebee's was struggling and ihop was doing well she and the rest of the company felt that they can be successful in saving applebee's by essentially repeating the process that they had just used for ihop i hope that all makes sense in short julia stewart had a personal motivation to turn things around at applebee's and a proven method to do it the entire plan didn't quite work out as they had hoped the recession occurring almost directly after the acquisition complicated things but with all things considered i would say applebee's hung in there pretty well they were holding steady enough while transitioning into an entirely franchised structure by 2015 but soon after is where things started to go worse than ever before the core of the issue here was probably the fact that julia stewart and the rest of the applebee's team became really concerned with attracting younger customers i think they felt that the overall brand had become too bland and stale and they wanted to establish a more trendy identity which as someone who is in that age group that they were trying to attract i can understand it i tend to view applebee's as being kind of typical and bland their plan here involves selling higher quality food remodeling the locations with more modern looks and even becoming more health conscious but in doing all of this they started to lose that friendly neighborhood feeling their prices went up and overall their existing older customers were turned off by it i think of this as one of those high school movies where the main character abandons their friends to hang out with the cooler crowd but hopefully in the end learns who their true friends really are well applebee's fell victim to this i think it's best exemplified by their wood-fired grills and their hand-cut stakes around this time an estimated 75 million dollars was spent to install all of these wood fire grills in applebee's locations it's just like it sounds they would use the fire that came from the wood to cook the food it was mostly intended to cook these higher grade hand-cut steaks that they were introducing looking back we can see exactly how this entire effort was misguided it raised them from that middle ground into the more higher end steak houses which made their existing customers less interested nor did it do much to attract the younger customers that confused their brand image and cost millions of dollars it was such a disaster that julia stewart stepped down from her long time position soon after and that would probably mark the lowest point for applebee's but as i hinted at there were some better times to follow from there they brought in a new ceo steve joyce who immediately worked toward reversing many of those changes in an attempt to bring them back to that middle ground they introduced the dollar rita i don't like saying that word but it was big and it was followed by other cheap drinks and just overall placing a bigger emphasis on the prices and promoting themselves as a value brand it helped contribute to an increase in their same store sales and kind of stopped that free fall that they had slipped into following those disastrous hand-cut stakes which they desperately needed obviously i wouldn't say that all of their problems are solved but they did make some pretty big changes that seem to be guiding them in a much more positive direction let me know in the comments what do you think of applebee's is your opinion of them changed over the years and if it has does it line up with their various rises and falls and what do you see for the future of applebee's are they finding their way out of the woods or do more changes still need to happen and i'm curious to ask for anyone who is a frequent customer what is the biggest reasons you go there for food or atmosphere or the prices what makes you favor them over some of their competitors and any other thoughts you have about applebee's or ihop or anything else i talked about in this video leave them in the comments i'd like to hear what you have to say thank you for watching [Music] you

Channel: Company Man

Views: 746,004

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Id: hFmb7A_7CwU

Length: 11min 22sec (682 seconds)

Published: Wed Mar 10 2021