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APPLEBEE'S INTERNATIONAL, INC.
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Associate Question & Answers
1. What was announced today?
We announced that a committee of independent board members has been formed
to evaluate potential ways to increase value to shareholders. These
"strategic alternatives" could be any one of several things, including a
recapitalization or sale of the company.
2. Why was this announcement made now?
For about the past two years the casual-dining restaurant segment has been
hit with softer sales and declining traffic. As a result, a number of
restaurant companies have announced various new strategic plans to enhance
shareholder value, for example: Outback, Brinker, Ruby Tuesday, Rare
Hospitality, Cracker Barrel, Sonic, and McDonald's. Likewise, we've decided
to consider additional actions (or "strategic alternatives") to increase
shareholder value in this difficult operating environment.
3. What are the "strategic alternatives" being considered?
There aren't any limits to the type of strategic alternatives a management
team or a Board may consider. It could range from additional leverage
(adding more debt), to a more aggressive stock buy-back plan, to taking the
company private in a leveraged buy-out, to the sale of Applebee's to
another company. Our board and the committee have retained some of the top
investment bankers to help us determine the best course of action to reward
our shareholders, while also ensuring the future growth and success of the
company.
4. What is a "recapitalization" and what would it mean to me?
A recapitalization, or "leveraged recap" usually involves a company taking
on considerably more debt to fund either buying back a large amount of
stock or issuing a bigger dividend to shareholders. (For example, last week
Domino's Pizza announced a recap.) A recapitalization usually has little,
if any, direct impact on associates or day-to-day operations.
5. Why would we consider a sale of the company?
We believe the company could be very attractive to potential buyers. We
have a leading national brand; one of the strongest franchise systems in
the industry; a steady, healthy cash flow; and, importantly, at all levels
of the organization we have some of the industry's most successful,
talented and results-driven associates.
6. If Applebee's is sold, who might buy us?
There are two types of potential buyers. First, there are "strategic"
buyers. These are other operating companies that might want to purchase a
new restaurant concept. The second type of buyer is a private equity group
that wants to invest in a business with strong growth potential. These
types of buyers, sometimes called "financial sponsors," can take a public
company, like Applebee's, private through a leveraged buy-out (LBO). Nearly
all of the restaurant companies that have been sold in the past couple of
years have been sold to financial sponsors (for example, Outback, Ruth's
Chris and Dunkin Donuts).
2.
7. If we're sold, will we still be a public company?
It depends. If another restaurant company buys us and that company is a
publicly-traded company, then we would be part of a public company. If a
private restaurant company buys us, or if a private equity group purchases
the company, then the answer is "no." But, let's remember two things:
First, it's too early to speculate on whether a sale might happen. The
Board may choose another option like a recapitalization or something else.
The Board also could decide to take no action. Secondly, there are benefits
and drawbacks to both - to being a publicly-traded company or being a
privately-owned company. So here's the real bottom line: whether we are
sold or not sold, public or private, recap or no recap, we must stay
focused on executing our operational plan and we must deliver results.
8. Will some of the company markets be sold?
As previously stated, we are evaluating all options and no decisions have
been made yet. But we can tell you that we strongly believe that, as a
franchisor, we should own and operate restaurants. It gives us the ability
to test new food and new ideas in our markets; it gives us credibility with
our franchisees, and it allows us to lead by example. Company-owned
restaurants also provide us with a revenue stream to support our $4.7
billion brand. As we have demonstrated in the past, if we believe that a
market can be more effectively operated by one of our franchisees, then
selling could be a positive move for the company, for the franchisee and
for the associates in that market.
9. How soon will we know more?
Is there a typical timetable for these events? There's really no
established timeline for this type of process. We are committed to a
thoughtful and thorough examination of our options to ensure we come to a
good decision. Some of the other companies that have gone through a similar
process have taken several months to announce anything, but no two
processes are exactly the same. It could be more time, or less time, before
we can share additional information with you. But, as always, communicating
with you, our associates, is one of our top priorities. We will let you
know more as soon as we can.
10. Does this have anything to do with the activist shareholder, Breeden
Partners?
Management and the Board take seriously their responsibility to create
value for all shareholders, while also ensuring the future growth and
success of the company. As previously mentioned, much of the restaurant
industry has been experiencing soft fundamentals for more than two years.
As a result, numerous companies have announced various strategic
alternatives, so this action is not unique to Applebee's, nor is it driven
by any one shareholder. The management team and the Board had begun to
think about steps that could enhance the value of our stock even before
Breeden Partners announced its 5 percent ownership. We remain committed to
giving thoughtful consideration to the views of all of our shareholders
about our business and about our strategic alternatives.
11. Does this announcement affect our plans for 2007?
No. We are full-steam ahead on our 2007 plans. As we've talked about
before, it is critical that we stay focused and deliver on our commitments
to improve traffic and sales in 2007.
3.
IMPORTANT INFORMATION Applebee's International, Inc. ("Applebee's") plans
to file with the SEC and mail to its stockholders a Proxy Statement in
connection with its 2007 Annual Meeting, and advises its security holders
to read the proxy statement and other documents relating to the 2007 Annual
Meeting when they become available, because they will contain important
information. Security holders may obtain a free copy of the proxy statement
and other documents (when available) that Applebee's files with the SEC at
the SEC's web site at www.sec.gov. The proxy statement and these other
documents may also be obtained for free from Applebee's by directing a
request to our Corporate Secretary, Applebee's International, Inc., 4551
West 107th Street, Overland Park, KS 66207.
CERTAIN INFORMATION CONCERNING PARTICIPANTS Applebee's, its directors and
named executive officers may be deemed to be participants in the
solicitation of Applebee's security holders in connection with its 2007
Annual Meeting. Security holders may obtain information regarding the
names, affiliations and interests of such individuals in Applebee's Annual
Report on Form 10-K for the year ended December 25, 2005, and its proxy
statement dated April 11, 2006, each of which is filed with the SEC. To the
extent holders of Applebee's securities have changed from the amounts
disclosed in the proxy statement, such changes have been reflected on
Statements of Change in Ownership on Form 4 filed with the SEC. These
documents are available free of charge at the SEC's website at www.sec.gov.
4.