Financing

Applebee's 2nd-largest franchisee files for bankruptcy

RMH Franchise operates 163 stores in 15 states.

Despite recent signs of improvement for the Applebee’s brand, one of the casual leader’s largest franchisees has filed for Chapter 11 bankruptcy protection.

RMH Franchise, based in Atlanta, operates about 163 units in 15 states. It is believed to be the system’s second-largest operator.

An officer of RMH told a local newspaper that the restaurants will remain open as a plan or reorganization is drafted.

The request for protection from creditors comes at what Applebee’s parent Dine Brands Global characterizes as the start of a turnaround. The chain’s same-store sales for the first quarter rose 3.3%, the steepest climb since the first quarter of 2011, according to management. Traffic patterns have been the strongest in more than a decade, according to brand President John Cywinski, though he did not reveal the absolute number.

The franchisor acknowledges that some franchisees still need help.

“Over the last year we have worked very closely with our franchisees to return Applebee’s to positive traffic and sales while consistently out-performing the CDR [casual-dining restaurant] category," Cywinski said in a statement provided to Restaurant Business. "During this time, we continued to address franchisee financial health through a collaborative effort between ourselves, a third-party advisor and franchisee representatives. In this case, while unfortunate, we continue to do whatever is necessary to protect the restaurants and the overall health of the brand.”

Currently, only three franchisees are behind in their royalty and advertising fund contributions, interim Dine Brands CFO Greggory Kalvin told financial analysts last week. 

The parent company contributed an extra $13.5 million to the all-franchised chain’s ad pool in Q1, and plans to channel another $16.5 million into the kitty through the remainder of the year.

Applebee’s said last year that it was providing financial assistance to distressed franchisees, but divulged neither the amount of financial assistance, in what form it was extended, nor the identity of the operators in distress.

RMH said in the bankruptcy filing that it has between $100 million and $500 million in assets, and between 5,000 and 10,000 creditors.

The filing was made with the U.S. Bankruptcy Court for the District of Delaware.

Applebee’s consists of 1,912 restaurants. The brand has closed 86 units in the past year, and expects to start expanding again in late 2019.

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