Greg Flynn could be excused if he wanted to walk away from casual dining. His company, Flynn Group, is the largest franchisee on the planet. But Applebee’s, the brand he first invested in in the late 1990s and which for a long time was his core restaurant chain, has been underperforming of late, including a 5.9% decline in same-store sales last quarter.
The full-service sector, meanwhile, has taken plenty of lumps, between bankruptcy filings by TGI Fridays and chains like Red Lobster, to general overall weakness outside of a couple of select brands, including rival Chili’s—which outperformed Applebee’s same-store sales by some 20 percentage points.
But walk away? No. In fact, he said at the Restaurant Finance and Development Conference this week that he would invest in casual dining again.
“Yeah,” he said, “for sure.”
To Flynn, the problems in casual dining were largely numerical. There were simply too many of them and they looked too similar. The recent bankruptcies and closures, in other words, were overdue.
“The casual dining space got deeply, deeply overbuilt,” Flynn said. “There were a lot of concepts and they weren’t really competitively distinguished. There was bound to be a washout or consolidation, and that’s what we’ve seen.”
“The failures, bankruptcies in casual dining recently is expected,” he added. “It was later in coming than I expected, but we all expected it.”
But there remains room in the full-service space, he said. Consumers aren’t going to get all their restaurant means from fast-food chains. Some folks will want to sit down.
“There will always be a large market for sit-down dining with liquor,” he said. “There’s 330 million people that want to go out and sit down and have drinks. That’s the basic business, where someone is going to sell into that market profitably. Applebee’s is in as good a position as anyone.”
The chain, he said, enjoys economies of scale and is a “great value play” and should benefit as smaller players are washed out. “It’s coming down to a few players like Applebee’s and Olive Garden and Chili’s and Texas Roadhouse,” Flynn said.
Flynn is one of the restaurant industry’s most quotable executives. And he provided a few more during an hour-long interview.
Don’t be like early Greg Flynn. The restaurateur first bought Applebee’s in the late 1990s. The brand was “the fast casual of the 1990s,” with rapid growth and strong returns. Lenders would loan 100% of the cost of an Applebee’s.
Flynn’s company borrowed 100% of the cost of eight Applebee’s.
“They were being excessive,” Flynn said. “It was just like mortgage lending, but as a borrower you didn’t care. We borrowed all the money for eight restaurants.”
But he would not advise that today.
“You set yourself up to fail,” he said. “You should operate with a consistently moderate level of debt. It worked out for us. They made it easy to get in. But I wouldn’t advise going in with that high a level.”
Flynn’s biggest mistake. One notable story Flynn told was about Cava. The franchisee met the chain’s CEO, Brett Schulman, several years ago. Schulman offered him a chance to invest in the chain, when it had just about 10 locations.
“Biggest mistake of my life,” Flynn said.
He had good things to say about Cava, noting that Mediterranean food is healthier for you and is good. Flynn also said he was considering establishing an arm of his business to invest in younger growth companies.
“We can afford the risk and losses,” Flynn said. “And it might be fun.”
What to do in a franchise dispute. Flynn, who operates several brands including Taco Bell, Panera Bread, Wendy’s and Pizza Hut in addition to Applebee’s, said he has no interest in ever publicly criticizing the franchisors, saying it’s not productive.
“If we ever really went sideways with the franchisor, I’d rather just get out,” he said. “It’s mutually destructive to fight this franchise, or especially publicly. We’re not going to do that.”
Exit plan? Greg Flynn apparently isn’t thinking of the exits. “I don’t think a lot about an exit,” he said. “I have no plans to exit. I’m 60 years old, hopefully I’ll be working another 20 years.”
But the company is in good hands, he said, no matter what.
“I’ve got an incredible team,” he said. “If I got hit by a bus, we wouldn’t miss a beat. We’re not a family business. We’re a professional management team. I play a role. But somebody could play my role.”
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