Applebee’s is suing a Kansas City franchisee who closed eight locations and filed for bankruptcy late last month.
In a complaint filed Oct. 30 in Kansas District Court, the casual-dining restaurant company accused Apple Central KC of closing the restaurants without permission, a violation of its franchise agreement. Applebee’s said Apple Central owes it nearly $4.5 million in future lost royalties and advertising fees and $3.6 million in rent.
With the lawsuit, Applebee’s is hoping to recover those amounts from Apple Central.
According to Apple Central's Oct. 30 bankruptcy filing, the companies’ relationship began in 2015, when Apple Central acquired 23 company-operated Applebee’s restaurants in the Kansas City area for $10 million.
The restaurants were losing money at the time, and Apple Central intended to turn them around. It got good results at first, but the restaurants began to lose money again after Applebee’s introduced a hand-cut, wood-fired steak promotion in 2016. Sales began to recover in 2018 and 2019, but that progress was eliminated by the pandemic. A brief rebound was soon erased by rising food and labor costs and a decline in consumer spending.
All told, Apple Central closed 13 restaurants from 2016 to 2023. It then closed eight additional unprofitable restaurants last month. It is hoping to sell or continue operating the remaining two locations through the bankruptcy process.
Apple Central reported assets of between $1 million and $10 million and liabilities of between $10 million and $50 million.
It comes as Applebee’s 1,620 restaurants continue to struggle with declining traffic and sales. In the third quarter, same-store sales fell nearly 6%, parent company Dine Brands reported Wednesday. It was the chain’s sixth straight quarter of negative same-store sales.
Apple Central was the second Applebee’s franchisee to hit bankruptcy in October. Earlier in the month, 14-unit operator Louisiana Apple was forced into Chapter 11 by a lender.
They are among a growing list of restaurant bankruptcies this year, a sign of the lingering effects of the pandemic and a difficult operating environment.
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