I trust everyone had a nice Halloween! Apparently the markets were a little spooked today, …must have been those scary costumes (I can swear I saw a few Ben Bernankes wandering the streets of New York last night).

In other news, several months ago I blogged about IHOP’s acquisition of Applebee’s (see here). If I remember correctly, I was relatively upbeat about the whole ordeal. I thought that Julia Stewart (IHOP’s CEO) would be in a privileged position when it comes to righting Applebee’s strategy given her prior experience as an executive at Applebee’s. Moreover, I felt that her experience at Applebee’s would help the integration go more smoothly. Given the market’s reaction on the day of the announcement, it seemed to agree.

So I found it interesting that the WSJ published an article today detailing the difficulty that IHOP will likely face in righting Applebee’s (see IHOP’s Tall Order: Reviving Applebee’s, hat tip Sandra Chang). The journal writes:

Now that shareholders have approved IHOP Corp.’s approximately $2.1 billion purchase of Applebee’s International Inc., the pancake chain has to overcome skepticism as to whether it can pull off a turnaround of the nation’s largest sit-down restaurant chain.

…reviving Applebee’s will be a more difficult task given the size of the chain and the depth of its problems. Applebee’s said same-store sales at company-owned locations have fallen 1.1% so far in October. CIBC World Markets analyst John Glass said that Applebee’s profit margins at the restaurant level during the third quarter were the worst in the company’s history, calling it a “fundamental meltdown.”

It’s quite possible Applebee’s is too sick for anyone to cure. My point simply is that if anyone has a chance to turn Applebee’s around, I think Julia Stewart is in the best possible position. Moreover, given the recent broad-based downturn in consumption in the U.S. economy, Applebee’s performance doesn’t strike me as out of the ordinary. For these reasons I remain cautiously optimistic about the deal. We shall see…

This entry was posted on Thursday, November 1st, 2007 at 2:20 pm and is filed under Corporate Strategy. You can follow any responses to this entry through the RSS 2.0 feed. You can skip to the end and leave a response. Pinging is currently not allowed.