New strategy leads to changes in Applebee's restaurants

OVERLAND PARK, Kan. -- The saying in the executive suite at Applebee's International Inc. is that it's better to go through an evolution than be forced into a revolution.

Thus the company is executing a tweak here and a twist there in all 852 Applebee's Neighborhood Grill & Bar restaurants, including two in metropolitan Oklahoma City. The hope is the changes will make customers believers in Applebee's newest slogan, "You Belong at Applebee's."

And if the changes rev up revenues and profits, so much the better, say executives at Overland Park, Kan.-based Applebee's, now the largest casual dining chain in the United States. "But that's not what's driving this -- this is to keep our concept fresh," said Lloyd Hill, co-chief executive officer and president of Applebee's. Hill said his company is charting new territory. "We're hacking away through the jungle," Hill said. "Nobody's ever been here before -- we're a young company that's had enormous growth that's now moving from an entrepreneurial phase to a professional, planned-thinking one." The shifts customers will see in both old and new Applebee's restaurants include: * Replacing beige-and-brownish plate ware with bright, white plates ringed with red apples. * Lighter and brighter walls, tables and chairs. * A refreshed menu that's eclectic and ethnic. Menu items will range from Mexican to Mediterranean to Oriental. * Replacing brass with wrought iron for a more contemporary look. * Tall, tower entrances that boost the visibility of the Applebee's sign. The company has incorporated all of these elements into a new prototype restaurant opened in April in a Kansas City suburb. To embark on this rejiggering, Applebee's is significantly increasing capital expenditures for the year. The corporation will be responsible for the enhancements at its 162 company-owned restaurants, while franchisees will pay for upgrades at the 690 franchised restaurants. Just the cost of the 613,400 new pieces of china alone, at about $6,000 per restaurant, will cost more than $5.1 million systemwide. And Applebee's costs for new plate ware aren't factored into its planned capital expenditures for 1997. Last year, Applebee's spent $65.7 million on capital expenditures, including new stores, remodeling and new technology. This year the estimated budget falls between $120 million to $125 million, including $36.1 million for the purchase of 11 Applebee's in St. Louis. Although many analysts who follow the company have lowered earnings estimates for the year by an average of 2 cents a share because of the increased expenditures, most say the money is being wisely spent. "We think this will make them a better positioned company in a tough environment," said Michael Fineman of Raymond James & Associates Inc. in Florida. "And it is tough." Hill said competitors typically play catch-up with Applebee's on most fronts, so it's going to be up to customer service and the little things to set his chain apart. "We differentiate ourselves with food, but people copy us," Hill said. "We differentiate ourselves with our advertising and marketing, but others say, `Oh look, look what Applebee's is doing -- let's do that.' So it's our people and their ability to connect with the customer and exceed their expectations that differentiates us."

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