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  Applebee's


Average Property & Lease

Average Sale Price$3,279,846
CAP Rate (12mo avg with 10+ lease term)5.95%
NOI$193,169
$/Square Foot$500 - $700
Building Size4,500 - 5,000 sf
Lot Size0.5 - 1.5 acres
Lease Term15 +/- Years
EscalationsVaries
CREDIT RATING
N/A
S&P
N/A
Moody's
view credit rating chart
View Net Lease Property Listings at CALKAIN.COM Last Updated: September 9, 2016
Net Lease Advisor Overview

Applebee's is a leader in the casual dining market, and has become an increasingly popular net lease investment property. In 2007, DineEquity (DIN) acquired Applebee's International, bringing together the IHOP and Applebee's brands to create the largest full-service restaurant company in the world.

DineEquity has successfully transformed Applebee's operational strategies by refranchising and selling Applebee's-owned real estate through sale-leaseback, net lease transactions. This initiative has allowed Applebee's to reduce costs and pay down debt balances, and DineEquity continues to market company-owned Applebee's restaurants.

Prior to IHOP's purchase of Applebee's, the majority of available net leased assets occupied by Applebee's were locations operated by franchisee's through small sale-leaseback transactions or divesture of build-to-suit construction from merchant developers. These franchisee-owned assets often had varying lease terms, however they generally have been 15 to 20 year leases, on an absolute NNN basis. Rental increases also varied, with some offering 2.00% annual rent bumps while others were adjusted every 5 year at a rate of 10% - 15%.

Through IHOP's acquisition of Applebee's, the new parent company DIN Equity facilitated one of the larger sale-leaseback transactions in terms of the number of retail locations sold, which has brought substantial supply to the net lease marketplace. These DIN Equity sale-leaseback locations have all signed identical leases featuring 20 year initial terms, 2% annual rent bumps during the first 5 years, then adjusting to a 10% rent increase every 5 years thereafter. While these sites are all corporately guaranteed, the lease provides an assignment clause that allows the parent company to assign the lease to a franchise operator at any time, so long as the meet certain criteria, which has forced investors to analyze these properties as if they were guaranteed by a franchisee versus corporate.

In regards to the real estate, Applebee's requires 1.0 - 1.5 acres of land with a 5,500 SF building, often situated as a pad to larger regional shopping centers. While the quality of the underlying real estate is important, reviewing individual unit sales data will provide the best clarity of operational strength and potential long-term viability. Key factors to consider are credit strength of franchisee given assignment, store sales data, and the location of the real estate.

Pros

Cons

  • Large land parcel
  • Rental increases throughout primary term of lease
  • Absolute NNN leases
  • Tough sector during recession
  • Credit of tenant
  • Franchisee assignment clause
Tenant Description

Applebee's Services, Inc. franchises and operates the Applebee's Neighborhood Grill and Bar restaurant chain, known for its fun, family-oriented atmosphere and signature menu.

In 2007, IHOP completed the purchase of the Applebee's chain, and now parent company DineEquity (NYSE: DIN) controls both brands. The Applebee's restaurant concept is mainly freestanding units with sport interiors decorated with local memorabilia to give each restaurant a local flare. The menu features mainstream American dishes and differentiate itself with innovative concepts such as Weight Watchers options, and Carside to Go pickup.

Applebee's is the largest casual-dining chain with nearly 2,000 locations. More than 400 locations are company-owned, but the majority of units are franchised. Applebee's intention is to increase franchise ownership by selling the majority of company-operated Applebee's restaurants to interested franchisees over the next several years. DineEquity is focused on improving the same-store sales performance and re-energizing the brand performance.


APPLEBEE'S TREND
CAP Rate

2015 avg: 6.15%

2016 avg: 5.51%

RECENT SALES

Kansas City, MO

$3,617,000 | 5.80%

Delray Beach, FL

$2,525,000 | 5.50%

MORE INFO
www.applebees.com
Google Finance: DIN
Google News: DIN