Net Lease Advisor Tenant Applebees


  • 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 is a leader in the casual dining market, and has become an increasingly popular net lease investment property. In 2007, IHOP completed the purchase of the Applebee's chain, and now parent company DineEquity (NYSE: DIN) controls both brands, creating the largest full-service restaurant company in the world with nearly 2,000 locations. More than 400 locations are company-owned, but the majority of units are franchised.

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.

Through IHOP's acquisition of Applebee's, the new parent company DineEquity facilitated one of the largest sale leaseback transactions in terms of the number of retail locations sold, which has brought substantial supply to the net lease marketplace. These DineEquity sale leaseback locations have all signed identical leases featuring 20-year initial terms, 2% annual rent bumps during the first five (5) years, then adjusting to a 10% rent increase every five (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 franchisee meets certain criteria. This assignment clause has forced investors to analyze these properties as if they were guaranteed by a franchisee versus corporate.

For real estate, Applebee's requires 1.0 - 1.5 acres of land with a 5,500 square foot 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.

Founded nearly three decades ago on the principles of exceptional value and family fun, Applebee's Services, Inc., operates what is today the largest casual dining chain in the world. This prominent eatery draws people of all ages and lifestyles with its fun, family-friendly atmosphere and signature bar and grill menu.
Applebee's continues to grow and prosper, and further differentiates itself with innovative attractions, like the popular Carside to Go service available at many of its restaurants. Currently, there are over 2,000 Applebee's restaurants operating system-wide in all 50 states, 15 international countries and 2 US territories. The Applebee's system employs approximately 28,000 people company-wide.

Average Cap Rate
12 mo avg with 10+ yr lease term
Average Property & Lease
Average Sale Price $3,395,664
NOI $208,494
$/Square Foot $600 - $700
Building SF 5,000 - 5,500
Lot Size 0.5 - 1.5 Acres
Lease Term 15 - 20 Years
Escalations Varies
Stock Symbol DIN
Credit Rating
Moody's N/A
Average Cap Rate Trend
Rates reflect last 12 mos, short and long-term
Recent Sales Comps
Savannah, GA 5.75%
Chester, VA 6.78%
Onalaska, WI 6.85%