Applebee’s is arguing that a franchisee’s purchase last year of the Logan’s Roadhouse chain violated its franchise agreement and is asking a court to step in.
In a complaint filed Friday in Kansas district court, the casual-dining chain alleges that franchisee Apple Texas and related entities, along with principal shareholder Sunil Dharod, broke their covenant with the franchisor when parent company SSCP Management acquired Logan’s late last year.
Applebee’s argues that Logan’s is a direct competitor, and that SSCP’s involvement with both brands creates a conflict of interest that could cause “severe, irreparable and continuing harm” to Applebee’s.
The filing comes in response to a March lawsuit brought by Apple Texas against Applebee’s. That suit accuses Applebee’s of breaking its side of the franchise agreement by opening co-branded Applebee’s-IHOP locations in Apple Texas’ exclusive territory.
Applebee’s is countering that those agreements are no longer valid because of the Logan’s purchase as well as other, earlier violations by the franchisee. And it is asking the court to force SSCP to divest its ownership of Logan’s.
“We work closely with our franchisees and respect their development rights, with a shared focus on supporting their growth and long term success,” said John Peyton, CEO of Applebee’s parent company Dine Brands, in a statement. “The franchisee referenced in this lawsuit is not in good standing, as outlined in our countersuit, and we will defend our position vigorously.”
SSCP had not responded to a request for comment as of publication time.
The story begins in 2008, when Dallas-based SSCP acquired 37 Applebee’s locations under the affiliate Apple Texas. Related groups Apple Houston, Apple Cal and Apple Vir followed. Today, SSCP operates 79 Applebee’s in Texas, California and Virginia. It also owns Corner Bakery, Cicis and Roy’s and operates dozens of Sonic Drive-Ins.
According to Applebee’s, its franchise development agreements with Apple Texas and Houston required the franchisees to open a certain number of new locations in their territories by a certain time. Apple Texas opened one new restaurant and closed at least two in that period, while Houston did not open any and closed at least four.
Because of this, Applebee’s says, the agreements were terminated “several years ago,” which would mean that Apple Texas and Houston no longer hold exclusive rights to the Applebee’s brand in their territories.
In its lawsuit, Apple Texas argues that its obligation to open new restaurants was voided by addendums to the original agreements signed in 2022. That is why it took issue when an IHOP franchisee converted a restaurant in Euless, Texas, to a co-branded Applebee’s-IHOP in February.
Apple Texas claims that this move infringed on its exclusive turf; Applebee’s denies this.
However, in its counterclaim, Applebee’s says that regardless of the status of those development agreements, SSCP’s acquisition of Logan’s is a further violation of them.
SSCP quietly acquired the 115-unit Logan’s, through a subsidiary, from SPB Hospitality late last year. The deal was not widely reported until March 10.
In its counterclaim, Applebee’s argues that Logan’s and Applebee’s are direct competitors. Both brands, it says, serve steaks, beer and other American fare such as sandwiches and salads in a full-service setting. It also says that 78 Logan’s restaurants are located within 5 miles of an Applebee’s.
It argues that SSCP's position as Logan's franchisor and Applebee’s franchisee is an effort to “manipulate the marketplace” and will have “immediate and substantial harmful effects on both Applebee’s and the public.”
On March 17, Applebee’s says it notified Apple Texas on a teleconference that its ties to Logan’s violated the non-competition provision in their franchise agreement. Applebee’s followed up with a written notice of default on April 3 and asked the operator to divest itself of its interest in Logan’s.
Two days later, Apple Texas filed its lawsuit against Applebee’s over the co-branded locations, according to court records.
In its lawsuit, it argues that Applebee's and Logan’s are fundamentally different brands and that other Applebee’s franchisees have operated Logan’s and similar concepts, such as Bar Louie and Quaker Steak and Lube.
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