UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) February 11, 2004
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Commission File Number: 000-17962
Applebee's International, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 43-1461763
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
4551 W. 107th Street, Suite 100, Overland Park, Kansas 66207
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(Address of principal executive offices and zip code)
(913) 967-4000
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(Registrant's telephone number, including area code)
None
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(Former name or former address, if changed since last report)
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Item 5. Other Events
The following information is provided by Applebee's International, Inc.
(the "Company") in accordance with the Private Securities Litigation Reform Act
of 1995 as it relates to a safe harbor for companies making forward-looking
statements. These forward-looking statements are included in the Company's
reports, news releases, proxy statements and registration statements filed with
the Securities and Exchange Commission as well as other written or oral
statements made by Company representatives. The factors listed below are
important factors that could cause actual results to differ materially from
those projected in forward-looking statements made by the Company.
System Growth. The Company's continued growth will depend upon the
ability of the Company and its franchisees to open and operate additional
restaurants profitably. The opening of new restaurants, both by the Company and
its franchisees, depends on a number of factors, many of which are beyond the
control of the Company and its franchisees. These factors include, among others,
the availability of management, restaurant staff and other personnel; the cost
and availability of suitable restaurant locations; acceptable leasing or
financial terms; the availability of capital to finance growth; cost effective
and timely construction of restaurants (which construction can be delayed due
to, among other reasons, labor disputes, local zoning and licensing matters, and
weather conditions); and securing required governmental permits. There can be no
assurance that the Company or its franchisees will be successful in opening the
number of restaurants anticipated, or that new restaurants opened by the Company
or its franchisees will be operated profitably.
In the course of expanding its restaurant systems, the Company and its
franchisees enter new or more highly competitive geographic regions or local
markets in which they may have limited operating experience. There can be no
assurance of the level of success of the restaurant concepts in these regions or
particular local markets. Newly opened restaurants typically operate with below
normal profitability and incur certain additional costs in the process of
achieving operational efficiencies during the first several months of operation.
When the Company or its franchisees enter highly competitive new markets or
territories in which the Company's restaurant systems have not yet established a
market presence, the adverse effects on sales and profit margins may be greater
and more prolonged.
The Company's system development plans depend, in part, on the
successful introduction of new smaller scale unit designs to be used primarily
in counties of under 50,000 in population. The successful entry into small towns
depends on many factors in addition to those described above, including supply
logistics, customer acceptance and advertising efficiencies. There can be no
assurance that the introduction of the smaller scale unit designs or the entry
into small towns will be successful.
The Company's expansion has and will continue to require the
implementation of enhanced operational systems. The Company regularly evaluates
the adequacy of its current policies, procedures, systems and resources,
including financial controls, management information systems, field and
restaurant management, and vendor capacities and relations. There can be no
assurance that the Company will adequately address all of the changing demands
that its planned expansion will impose on such systems, controls, and resources.
Our future growth depends in part on our acquisition of franchised
Applebee's restaurants. There is no assurance that we will be able to find
franchisee restaurants available for purchase or that we will be able to acquire
franchisee restaurants at favorable prices. In addition, if we do successfully
identify and complete acquisitions in the future, the acquisitions may involve
the following risks:
o increases in our debt and contingent liabilities; and
o entering geographic markets in which we have little or no direct
prior experience; and
o unanticipated or undiscovered legal liabilities or other
obligations of acquired franchisee restaurants.
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Even if we are successful in acquiring franchisee operations, there is
no assurance that we will be able to operate the acquired restaurants
profitably. The integration of acquired restaurants into our operations may
involve a number of issues, any of which could materially and adversely affect
our operations and financial performance. These issues include:
o burdens on our management resources and financial controls;
o diversion of money and resources to integration issues;
o potential loss of key personnel of acquired franchisee
restaurants; and
o potential loss of customer relationships and related revenues of
acquired restaurants as a result of a change in ownership.
We may acquire one or more additional restaurant concepts which may be
established operating businesses or businesses in the early stages of
development. Operating more than one restaurant concept presents many
significant risks that could, individually or together, have a material adverse
effect on our business and financial results. Our success in acquiring or
investing in new concepts is subject to the following risks:
o we may be unable to identify suitable opportunities;
o we may pay too much for our investment in the concept in light of
its long-term potential and actual economic return to us; and
o we may be required to borrow the funds needed to make our
investment in the concept, which will increase our interest
expense.
In addition, our ability to expand another concept, through our own
development or through franchising, will be subject to risks such as:
o we may not be able to find suitable locations at appropriate
purchase prices or lease terms;
o we may not be able to attract franchisees;
o we may experience construction delays or cost overruns caused by
numerous factors, such as shortages of materials and skilled
labor, labor disputes, weather interference, environmental
problems, and construction or zoning problems;
o we may not be able to hire and train experienced and dedicated
operating personnel; and
o we may face competition from other restaurants, including other
Applebee's either owned or franchised. Competitive factors
include:
* the quality and value of the food products offered;
* the quality of service;
* the price of the food products offered;
* the dining experience; and
* the ambiance of facilities.
Reliance on Franchisees. The continued growth of the Company is, in
part, dependent upon its ability to retain qualified domestic franchisees and to
attract franchisees for international markets and the ability of its franchisees
to maximize penetration of their designated markets and to operate their
restaurants successfully. Although the Company has established criteria to
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evaluate prospective franchisees, there can be no assurance that the Company's
existing or future franchisees will have the business abilities or access to
financial resources necessary to open the required number of restaurants or that
they will successfully develop or operate these restaurants in their franchise
areas in a manner consistent with the Company's standards. The Company intends
to continue its efforts to franchise restaurants in certain international
territories. The ability of franchisees to open restaurants outside of the
United States is subject to the same factors as are applicable to opening
domestic restaurants described above. There can be no assurance that the Company
will be able to attract qualified franchisees or that such franchisees will be
able to open and operate restaurants successfully.
Competition. Competition in the casual dining segment of the restaurant
industry is expected to remain intense with respect to price, service, location,
concept, and the type and quality of food. There is also intense competition for
real estate sites, qualified management personnel, and hourly restaurant staff.
The Company's competitors include national, regional and local chains, as well
as local owner-operated restaurants. There are a number of well-established
competitors, some of which have been in existence for a longer period than the
Company and may be better established in the markets where the Company's
restaurants are or may be located. The Company is experiencing increased
competition in attracting and retaining qualified management level operating
personnel.
Restaurant Industry. The restaurant industry is affected by changes in
consumer tastes and by national, regional, and local economic conditions,
demographic trends, traffic patterns, and the type, number, and location of
competing restaurants. Multi-unit chains such as the Company can also be
adversely affected by publicity resulting from food quality, illness, injury or
other health concerns or operating issues related to restaurant operations or
from food suppliers. Dependence on fresh produce and meats also subjects
restaurant companies such as the Company to the risk that shortages or
interruptions in supply, caused by adverse weather or other conditions, could
adversely affect the availability, quality or cost of ingredients. In addition,
factors such as inflation, increased food, labor, and employee benefit costs,
and the availability of qualified management and hourly employees may also
adversely affect the restaurant industry in general and the Company's
restaurants in particular. The continued success of the Company will depend in
part on the ability of the Company's management to identify and respond
appropriately to changing conditions.
Operating Costs. Restaurant operating costs consist principally of food
and beverage costs, labor and benefits costs, and occupancy costs, including
utility costs. Several of these factors are subject to price increases from time
to time due to market changes, minimum wage and other employment laws, and
inflation. In addition, from time to time, the Company may implement new menu
items and operating procedures at its restaurants, which may be either temporary
or permanent. Such operating procedures and menu items may result in increased
food or labor costs. The Company may not be able to recoup all operating cost
increases through price increases.
Government Regulation. The restaurant industry is subject to extensive
state and local governmental regulations relating to the sale of food and
alcoholic beverages and to sanitation, public health, fire, and building codes.
Termination of the liquor license for any restaurant would adversely effect the
revenues of that restaurant. Restaurant operating costs are also affected by
other government actions that are beyond the Company's control, including
increases in the minimum hourly wage requirement, workers' compensation
insurance rates, and unemployment and other taxes. The Company may be subject in
certain states to "dram-shop" statutes, which generally provide a person injured
by an intoxicated person the right to recover damages from an establishment that
wrongfully served alcoholic beverages to the intoxicated person. The Company is
also subject to federal regulation and certain state laws which govern the offer
and sale of franchises. Many state franchise laws impose substantive
requirements on any franchise agreement, including limitations on
non-competition provisions and the termination or non-renewal of a franchise.
Capital Expenditures. The Company's capital expenditures are primarily
related to the development or acquisition of additional restaurants, maintenance
and refurbishment of existing restaurants, and expansion of management
information systems, office space and other corporate infrastructure. The costs
related to restaurant development, maintenance and refurbishment include
purchases and leases of land, buildings and equipment and facility and equipment
maintenance, repair and replacement. The labor and materials costs involved vary
geographically and are subject to general price increases. There can be no
assurance that future capital expenditure costs will not increase.
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Share Repurchases. The Company currently intends to repurchase shares
of its common stock, subject to Board authorization limits. Any such repurchases
are subject to prevailing market prices, and pursuant to applicable restrictions
under the Company's debt agreements, may be made in open market or private
transactions and may occur or be discontinued at any time. There can be no
assurance that the Company will repurchase any common stock.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
APPLEBEE'S INTERNATIONAL, INC.
(Registrant)
Date: February 11, 2004 By:
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Steven K. Lumpkin
Executive Vice President and
Chief Financial Officer
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