Apple American Branches Out
Apple American Group has done just fine by focusing on one concept, Applebee's. It's done so well that it could well be the largest restaurant franchise in the country. So why is Greg Flynn now getting into Taco Bell?
"It's simple math," said Flynn, CEO of the San Francisco-based Apple American Group. "If you add 10 units from a base of 10, that's good growth. If you add 10 from a basis of 480, it's not." The upshot: if Flynn's company was to maintain a strong growth rate, it needed to get into something else. So two years ago, the company started taking a comprehensive look at the restaurant industry and ultimately concluded that Taco Bell was a good bet, thanks largely to its lack of direct competition in the ultracompetitive restaurant market.
So when 76-unit Los Angeles-based Southern Bells went on the market last year, Flynn jumped at the opportunity to make a big splash in his targeted concept. The deal, announced earlier this month, resulted in the reorganization of Flynn's restaurant holdings under a newly formed Flynn Restaurant Group. Apple American will operate the 438 Applebee's. Southern Bells has been renamed Bell American Group and will operate Taco Bells. Both Apple American and Bell American will be subsidiaries of Flynn Restaurant Group.
"The Taco Bell system was affirmatively attractive," Flynn said. "There's no rival to it. Burgers are competitive with McDonald's, Burger King, Wendy's. Chicken is competitive. Sandwiches are competitive. Everything is competitive except Mexican QSR." Chipotle? Perhaps, but only because Taco Bell has started moving in on the Denver chain's territory with its higher-end Cantina Bell menu.
Flynn said his company has the infrastructure and experience to operate a concept different from Applebee's. Yet it is giving itself some time to learn the brand. Flynn said the Applebee's and Taco Bell operations would be kept separate for at least 18 months before the company looks for cost synergies. In addition, Southern Bells' Charles Brown will stay with the company as president of Bell American. His role in part will be to guide Apple American as it makes this foray into the Taco Bell business. "We've left everybody in place, including Charlie Brown," Flynn said. "We'll study under the masters. Learn what we can. We don't presume to know everything." Flynn cited Southern Bells' strong management team as a reason he made the deal.
The acquisition culminated a busy period for Flynn's company, which took advantage of Applebee's refranchising, and of sales of other franchisees, to grow into a behemoth that now operates about 25 percent of the Applebee's system. That included last fall's purchase of the 99-unit Applebee's operator AmRest.
Flynn said the company still plans to keep building and acquiring more Applebee's restaurants, and has plans to build another 60 in four years. "Sixty is a pretty large growth opportunity," he said. "We'll never run out of growth opportunities."