Dine Brands’ development of more co-branded Applebee’s/IHOP restaurants has drawn a lawsuit from a franchisee.
Apple Texas and Apple Houston, which operate Applebee’s locations in the Dallas and Houston areas, are suing the franchisor in Kansas District court over the openings of co-branded stores in their markets.
The franchisees, subsidiaries of the large restaurant operator SSCP Management, argued that these openings violate their development agreements, which gave them exclusive rights to the Applebee’s brand in and around Dallas and Houston.
Apple Texas got into the Applebee’s business in 2008 with the purchase of 37 locations and Apple Houston followed in 2012, acquiring 21 locations. Today, SSCP operates 79 Applebee’s in Texas, California and Virginia.
According to the lawsuit, Applebee’s corporate allowed a co-branded Applebee’s/IHOP to open in Euless, Texas, in February, within the exclusive territory of Apple Texas. At least four other co-branded stores are slated to open within the franchisees’ territories.
The Euless restaurant has already been diverting customers and revenue from Apple Texas’ nearby locations, and the other co-branded stores are expected to have the same effect, the lawsuit says.
Co-branding has been a key piece of Dine Brands’ development strategy in recent years. The first Applebee’s/IHOP opened last February in Seguin, Texas, and franchisees have since added more than 30 others around the country, with 50 more planned for 2026.
Dine has said these locations generate 1.5 to 2.5 times the revenue of a stand-alone Applebee’s or IHOP because they serve breakfast, lunch and dinner. It says they offer franchisees a new development option or an opportunity to revive single-branded locations that are struggling.
But in the lawsuit, Apple Texas and Houston argue that co-branded stores “come at the expense of existing franchisees like Plaintiffs, who do not operate dual-branded locations but now have to compete with them in what should be Plaintiffs’ protected territories.”
According to the lawsuit, when the franchisee complained to Applebee’s late last year that it was infringing on its turf, Applebee’s responded that its development agreements had been terminated due to alleged breaches of contract, which meant Apple Texas and Houston no longer had exclusive rights to those territories.
Per the lawsuit, Applebee’s said that the franchisees had violated their agreements by failing to open more restaurants and by closing restaurants without replacing them. It also pointed to a landlord-tenant dispute that resulted in Apple Texas being locked out of a restaurant.
The franchisee countered that any obligations to open new Applebee’s were voided by addendums to the 2008 and 2012 agreements. According to the lawsuit, these revisions essentially said that Apple Texas and Apple Houston were not required to open any new restaurants and were free to close restaurants as well.
After the franchisee filed the lawsuit in March, the franchisor raised yet another issue with the operator: SSCP’s acquisition, through a subsidiary, of steakhouse chain Logan’s Roadhouse late last year. The franchisor argued that this violated the franchise agreement because Logan’s competes with Applebee’s. On April 3, Applebee’s sent a notice of default to the franchisee that threatened to force it to cease operations unless ownership cut ties with Logan’s Roadhouse.
The franchisee disputed that the Logan’s purchase violated its agreement, arguing that Applebee's and Logans' 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, without issue.
As a result of all this, Apple Texas and Apple Houston are asking the court to confirm that its 2008 and 2012 development agreements are still in effect, to block Applebee’s from opening more dual-branded restaurants in their territories, and for damages caused by the breach of their development agreements.
They’re also asking the court to rule that SSCP’s ownership of Logan’s Roadhouse is not a violation of its franchise agreement.
Restaurant Business reached out to Dine Brands for comment.
Applebee’s is coming off a mixed year. The 1,472-unit chain broke out of a long-running same-store sales slump, finishing 2025 with 1.3% same-store sales growth. But it also shrunk by about 30 locations, and total sales declined 0.8% overall, per Technomic data.
And some franchisees are struggling: Last month, 53-unit Neighborhood Restaurant Partners filed for Chapter 11 bankruptcy.
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