Overland Park, Kansas-based Applebee’s Int has agreed to acquire the assets of 21 restaurants in the Washington, DC area from its franchisee Apple Capitol Group.
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The deal, which is worth US$32.8m in cash at closing, also provides for additional payments if the restaurants achieve cash flow in excess of historical levels. The 21 restaurants are located in Maryland, Virginia, Delaware, Pennsylvania and West Virginia.
Lloyd L. Hill, chairman and CEO, said: “Part of our growth strategy is to use our strong balance sheet and substantial free cash flow for franchise acquisitions.
“We believe the territory in which the Apple Capitol restaurants are located will ultimately support a total of around 40 Applebee’s restaurants. These restaurants are contiguous to the Virginia market that we acquired in 1998. Year-to date comparable sales for these restaurants are positive and average weekly sales are in excess of US$41,000.
“The addition of these restaurants will complement and provide increased depth to our company operations and will bring our company ownership to about 24% of the system total.”
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By GlobalDataAs a condition of the deal, Apple Capitol has filed a voluntary Chapter 11 petition in the US Bankruptcy Court for the Southern District of Florida. The acquisition of the restaurants is anticipated to close in the Q4 2002, subject to normal bankruptcy court bidding procedures, obtaining operating licenses and other third-party consents. Depending upon the ultimate closing date, the company expects the addition of these restaurants to have a neutral impact on FY 2002 earnings and to be accretive to FY 2003 earnings.
Apple Capitol acquired the outlets from Avado Brands in May 1999 in the final transaction relating to that franchisee’s exit from the Applebee’s system.
