Applebee’s Neighborhood Grill & Bar is terminating the lease for its Lenexa, Kan., headquarters and planning to relocate to a smaller facility, a move that will allow the company to cut debt by about $34 million.
Parent company DineEquity announced late Monday it had reached an agreement with landlord Lexington LAC Lenexa LP, an affiliate of Lexington Realty Trust, to end the lease for the Applebee’s restaurant support center. The chain’s 350 employees there will be moved to a small, more appropriately sized facility in the Kansas City area, the company said.
The move, which is expected to occur before Sept. 30, is part of an ongoing strategy to transform the chain into a mostly franchised brand.
“Applebee’s restaurant support center was conceived and built under prior ownership and during a different direction for the company,” Julia Stewart, DineEquity’s chair and chief executive, said in a statement. “We anticipated the needs of the business would change as we implemented our strategy to become more highly franchised, and we acknowledged early on that would require moving to different offices in the Kansas City area better suited to our business model once a tenant could be found for the Lenexa campus.”
DineEquity estimates the lease termination will allow it to reduce debt by about $34 million. However, the company expects to see $26 million in pre-tax charges related to the agreement, including a $5 million non-cash impairment charge in the first quarter primarily related to leasehold improvements, and a cash lease termination fee and other closing costs of about $21 million in the second quarter.
The Applebee’s chain, which was acquired by IHOP in 2007, included 1,701 franchise locations and 309 company locations at the Dec. 31-ended fourth quarter.
Glendale, Calif.-based DineEquity also franchises and operates the 1,504-unit IHOP brand.
Contact Lisa Jennings at [email protected].