Applebee's Sees Room for 3,000 U.S. Outlets

Restaurant chain Applebee's International Inc. (APPB) on Thursday said there was room for at least 3,000 of its namesake restaurants in the United States, nearly double the existing number.

The Overland Park, Kansas, company, which operates about 1,600 restaurants in the United States, in 2002 had pegged the "ultimate domestic potential" for its Applebee's Neighborhood Grill & Bar (search) outlets at 2,300.

The dramatic upward revision to the company's growth target reflects the rapid rise of casual dining chains nationwide, according to Applebee's Chief Executive Lloyd Hill.

"There is kind of a Darwinian effect here," Hill said in an interview. "Independents are contracting, and that presents opportunity for chain restaurants."

By marketing itself as a friendly, neighborhood eatery, Applebee's has enjoyed explosive growth since going public in 1989. The chain has opened at least 100 restaurants a year since 1993, and Hill said he expected to keep adding outlets at the same pace over the next few years.

Applebee's has gained market share in recent months with the growth of its Carside To Go takeout business as well as a partnership with Weight Watchers International Inc. (WTW) to develop healthier menu options.

To help drive customer traffic and reinforce its status as a nationwide brand, Hill said Applebee's will increase the amount of money it spends on national advertising by about $30 million a year and trim the amount it spends locally by the same amount.

Applebee's, which held an all-day meeting with analysts and investors on Thursday, also said it expects earnings per share to rise between 14 percent and 17 percent over the next three to five years, beginning in 2005.

The company is also confident it can achieve such growth by sticking to its strategy of operating one brand.

Many of Applebee's biggest competitors, including Olive Garden parent Darden Restaurants Inc. (DRI) and Chili's Grill & Bar parent Brinker International Inc. (EAT), each operate several different restaurant chains.

But some, like Darden, which also operates the Red Lobster chain, have run into trouble when one brand suffers from a downturn in consumer interest.

Applebee's, however, has avoided a similar fate by focusing all its resources on one concept, Hill said, though he left open the possibility of a small acquisition.

"I did leave the door cracked," Hill said. "Whatever it might be it would have to be something that would not take energy and resources away from Applebee's, but it's not likely."

Applebee's expects systemwide comparable sales to increase at least 3 percent to 4 percent a year, and said the number of Applebee's restaurants will increase between 7 and 8 percent annually.

Applebee's shares rose 48 cents, or 1.9 percent, to close at $25.31 Thursday on the New York Stock Exchange (search).