DineEquity franchises stabilizing as credit gets on track

Jessica SarterFranchise Finance

As the corporate face of Applebee's and IHOP, DineEquity recently earned a 'B' credit rating from Fitch Ratings despite a mixed first quarter, a good sign for the franchise's financing.

The Wall Street Journal reported that the company is making a turnaround as it focuses on revamping its Applebees locations and menus. Shareholders saw increases in stock values and gross margin, but revenue dropped almost 20 percent thanks thanks to a massive sell-off in March. These targeted restaurants now will only pay royalties and fees instead of submitting all takings from each site. The Fitch press release also stated the company is looking to overhaul an additional four percent of its existing locations so that 99 percent will be franchised as opposed to the current 95 percent.

The franchise is still expanding too. Later this year Potomac Family Dining will be acquiring 39 http://www.dineequity.com/Applebee's locations in Virginia, netting DineEquity around $25 million and saving them about $1.6 million a year in operating costs. As more of Applebee's and IHOP's locations become independently owned and operated franchises and its payment systems roll over, investors can expect the company to continue to improve, says CEO Julia A Stewart. If you'd like to pursue a franchise loan to acquire your own DineEquity property, an online marketplace like Boefly can match you with interested lenders quickly and easily.

"With 96 percent of our restaurants franchised or soon to be franchised, our business model generates significant free cashflow," said Stewart in a recent press release. "[This enables] us to reduce debt and drive value for our stockholders."