Applebee’s has nearly reached its goal of becoming an almost-all-franchised brand with the signing Tuesday of an asset purchase agreement to sell 33 company-owned locations, primarily in Missouri and Indiana.
Applebee’s parent company, DineEquity Inc., said it has signed an agreement with American Franchise Capital LLC, based in Greenwich, Conn., whose managing partner William Georgas is a longtime Applebee’s franchisee.
Georgas was previously the co-managing owner of The Georgas Group, a franchise company that operated 47 Applebee’s locations. This is the first Applebee’s acquisition for the American Franchise Capital, however, which Georgas formed with Trevor Ganshaw with the goal of acquiring franchises in the U.S. and Canada.
The transaction, which is expected to close in the third quarter this year, is expected to result in net proceeds after taxes of about $26 million and will reduce DineEquity’s sale-leaseback-related financing obligations by about $22 million.
DineEquity expects to pay about $5 million related to the settlement of net working capital liabilities and deal costs, the company said. The sale is also expected to save about $1.3 million in annualized general and administrative expenses.
“We are pleased to announce the sale of 33 Applebee’s company-operated restaurants, reflecting yet another significant step in our strategy to transition to a 99-percent franchised restaurant system,” said Julia Stewart, DineEquity’s chair and chief executive, in a statement. “American Franchise Capital is a great franchise partner with deep operating experience.”
Since acquiring the chain in November 2007, DineEquity has sold 342 company-owned Applebee’s locations to franchisees. The company has long argued that a franchise business model is less capital intensive and less vulnerable to cash flow volatility.
Once the deal with American Franchise Capital is complete, along with another pending sale of 39 restaurants in Virginia announced earlier this year, the chain will be 97-percent franchised.
Glendale, Calif.-based DineEquity operates and franchises 2,018 Applebee’s restaurants, as well as the 1,551-unit IHOP brand.