FOOL CONFERENCE CALL SYNOPSIS*
By Debora Tidwell (MF Debit)

Applebee's International Inc <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: APPB)") else Response.Write("(NASDAQ: APPB)") end if %>
4551 West 107th Street, Suite 100
Overland Park, KS 66207
(913) 967-4000

UNION CITY, Ca., November 8, 1996/FOOLWIRE/ --- Applebee's International released third quarter 1996 results on November 4th. They feel their concept is still growing at a rapid pace with system-wide Applebee sales up 25% for the quarter. Both company Applebees and total company sales were up 21% for the quarter and total operating revenues were up 22% for the quarter. Operating earnings were up 27% for the quarter. Net earnings were up 34% and earnings per share increased from $0.28 in the 1995 quarter to $0.35 this quarter. That is after a 5% increase in the number of weighted average sales.

SYSTEM-WIDE SALES FOR APPLEBEE'S were $398.7 million in the quarter and $1.14 billion through 3 quarters. Since the end of the quarter, they have exceeded last year's total system sales volume of $1.25 billion with over two months remaining in this year. Comparable restaurant sales for company restaurants were up 0.8% and franchise comps were down 1.3% with total systems showing a decline of 0.9%. Despite the competitive environment, company restaurant guest counts have remained slightly positive as compared to the prior year and their guest check average remains in the $8.00-$8.50 range for 1996, also slightly ahead of last year.

RESTAURANT OPENINGS. As of today there are 799 Applebee's restaurants open, consisting of 144 comany-owned and 655 franchise restaurants. There have been 138 restaurants opened to-date this year of which 24 are company-owned and 114 are franchised. They are increasing the projected number of franchise openings to 130 from the previous 125 and adding the 30 company restaurants opening this year they expect to open a total of 160 new Applebee's restaurants in 1996. They will not open as many new restaurants in the fourth quarter this year as last year. They expect to open about 40 restaurants versus 55 in the same quarter last year. They are trying to keep restaurants from opening in the holiday season around December because of the difficulty of hiring and training in the holiday season. They feel they have evened out their opening process to a much greater extent this year. Their pipeline continues strong with 43 Applebee's under construction and 82 additional franchise sites approved for construction at the end of October. They do expect over half of those 43 restaurants under construction to open this year, leaving them presently with 15-20 of those under construction going over to 1997. They expect at least 100 franchised Applebee's restaurants and 30-35 company restaurants to open in 1997. Their future opening schedule remains strong.

PROFITABILITY. They are very pleased with the slow but steady growth in company restaurant profitability and are getting closer to their expected restaurant profit margins for company restaurants. Their overall corporate profit of 10.3% for the quarter represents an increase of 90 basis points over this past year.

FRANCHISE CONVENTION. They completed their 10th Annual Franchise convention a couple weeks ago in Orlando with over 900 franchisees, vendors, and company personnel attending. They have out 23 million-dollar sales awards and 46 $2.75 million sales awards. They also took the opportunity to inform their franchisees of their continued commitment to protect and build their future. They also highlighted some of the work and programs initiated about a year ago to propel Applebee's into the next century -- their new building design and remodel program, some of their current work on redesigning the menu, and their new marketing initiatives.

MARGINS. They lost a little ground in their food costs this quarter, primarily due to poultry costs which were close to contract stealing and, of course, dairy costs which hit an all-time high. Labor improvement balanced food costs, though, improving 40 basis points primarily due to improvements in their hourly labor costs which they believe resulted from OSCAR (their information technology initiative) which was in all of their restaurants by the end of the quarter. A lot of them had only had the automation in for the last two weeks of the quarter, but they still believe they got some improvement from it. They also had a reduction in Worker's Comp as a result of improving the way they are operating in their restaurants. The most significant improvement resulted from a reduction in advertising, as planned, from 3.75% in the second quarter to about 1.7% in the third quarter. The net result was a restaurant margin of 16.9% before pre-opening -- the highest in the company's history. Their expectations for the next couple of quarters going forward, given the competitive nature of the cycle they're in, is a run rate of low 16s to mid-16s.

CALIFORNIA. There is not a lot of update here from last quarter. They closed the sale of the 6 restaurants in the Inland Empire in mid-October. They continue to review the options they have on the disposition of the two remaining restaurants in Fontana and Colton. In San Diego, they have continued to review and evaluate their alternatives which remain as they were last quarter -- continue to operate those restaurants, develop a franchise alliance of some sort for future development, or simply transfer existing restaurants to a franchisee. Meanwhile, California margins improved in the quarter to over 2% positive. Also, the margin impact of the 6 restaurants they sold would have improved margins 20-30 basis points.

THE RIO BRAVO CANTINA CONCEPT. Rio Bravo sales continue to meet or exceed their expectations and their franchisees are showing strong support and demand for the Rio Bravo concept. The thing they are most enthused about are the opening volumes of the restaurants outside of the Southeast area. The thing, they said, you can never be certain of is if a concept will do well in other regions and it certainly looks like Rio Bravo will do well based on sales in Overland Park Kansas, Asheville North Carolina, Lexington Kentucky, Minneapolis, and Springfield Missouri. All of them are meeting or exceeding expectations. They are on target for 16 openings during the year including 3 more company restaurants. One of the new restaurants opened in St. Paul Minnesota, one of the Cantina Del Rio converts opens in Livonia Michigan last week, and then Taylor Michigan will open around December 10th. Franchisees opened in Wichita Kansas two weeks ago, Kenwood Ohio, Macon Georgia, Merryville Indiana and Mayfield Heights Ohio open in mid to late December. The continue to plan about 25 openings for 1997 including 8 company. Going forward they expect to add 1-3 franchisees at a time, as opposed to the waves of 5 or 10 that they have done in the past quarters. The biggest constraint for them on expanding Rio Bravo continues to be quality training. If there was ever an industry that personified the cliche "you only get one chance to make a good first impression" it is casual dining. Neither Applebee's International or their franchisees in either concept are willing to risk guest satisfaction.

EARNINGS AND TOPLINE TRENDS. Total operating revenue, company sales and franchise income increased 22% during the quarter, 21% on company sales and 27% on franchising. Company sales hit a new high of just short of $93 million for the quarter with $73.8 million in Applebee's system sales for company-owned, $15.4 million for Rio Bravo, and $3.8 million for their four specialty restaurants. Strong comp sales compared to both expectation and industry trends on the company side contributed also to a strong top line. In the third quarter, franchise openings were 35 versus 33 in the prior year, giving them a record $14.1 million in franchise income.

RESTAURANT MARGINS. As they said the restaurant margins came in at 16.9% for the quarter against 16.3% last year. Food and beverage costs increased 0.4%. Poultry, which really centers around the promotions they had in the third quarter, the second phase of Summer Fare which carried a chicken item not protected under their purchasing contract, and the early stages of the Rib Lickin' Chicken promotion they had also a couple of items not protected under contract due to the fact that they are custom-manufactured items. Offsetting that, Worker's Comp continued a very favorable trend and direct labor cost was down by 0.3-0.4% in Applebee's restaurants.

DIRECT AND OCCUPANCY COSTS came in at 23.7% versus 24.3% in the same quarter last year, an improvement of 60 basis points. In the first two quarters they had higher advertising costs both from the fact that they normally advertise more in the first half of the year due to the timing of their promotions and, especially this year given the elections and the availability and cost of TV advertising. On company stores they have been in the market with advertising in the last two months during the political campaigns, but not as heavily as in the past. As a result of that, in their investment spending earlier in the year, they had Applebees at the local discretionary level over and above their national at 1.7% versus 1.9% last year. They expect the fourth quarter to continue at a lower trend of less than 2%, giving rise to an overall advertising spending level of 2.5% for the year, plus 1.5% national for a total of 4%. Also in the direct and occupancy line they continue to see depreciation rise being offset by lower rent expense as they purchased a higher proportion of their restaurants.

PRE-OPENING COSTS. Pre-opening costs came in at $865,000. A little less than half of that was related to Rio Bravo ($400,000) and the remaining amount was Applebee's. Applebee's are right on track averaging $65,000 for the seven restaurants that opened in the quarter and, as they saw earlier in the year as they moved to new markets with Rio Bravo, their pre-opening costs run higher than their target once they are established in an area with trainers. As a result, as they entered Michigan and Minnesota for the first time in the quarter they had higher than expected and higher than desired pre-openings costs per unit.

GENERAL AND ADMINISTRATIVE EXPENSES. They continued to see positive leverage from the growing revenue base coming in at 10.4% this year versus 10.5% last year and 10.6% year-to-date which favorably trends towards their expectation set earlier in the year of just under 11%. They had a loss on disposition of property and equipment of $183,000 which includes about $75,000 of write-offs related to the disposition of the 6 California restaurants. They sold those at book value.

CASH AND INVENTORY. Cash balances are very strong and should meet their capital needs for the foreseeable future. They continue to have a $20 million revolver which is unused other than some minimal leverage of credit. Investment income continues to be strong as they have over $55 million in cash balances at the end of the quarter. Other income was higher than normal at $200,000 this year as they liquidated a significant portion of their riblet inventory to supply the promotion that started right after Labor Day and go through Thanksgiving. Their riblet inventory decreased by about $5 million during the quarter and gave rise to a certain amount of income on the sale. Total earnings before taxes was $17.6 million versus $13.2 last year.

TAXES were at 37.5%. Last quarter they adjusted the tax rate down to 37.5% reflecting the impact of a new state income tax restructuring they implemented earlier this year. They will re-evaluate that accrual rate at the end of the year once they see the full-year impact of the restructuring they have done.

EARNINGS. That brings them in at a record level of net earnings of just at $11 million, up from $8.2 million a year ago, a 34% increase in net income dollars and a 25% EPS growth of $0.35 in the quarter.

CAPITAL EXPENDITURES are at $47 million year-to-date after three quarters against a target and expected $75-85 million for this year. Next year their initial look is that they would expect $85-90 million of capital expenditures reflecting $30-35 company owned Applebee's and 8 company-owned Rio Bravos as well as their continued investment in remodelling, corporate office systems and restaurant systems.

NEW UNITS NEXT YEAR. In addition to the company-owned Applebee's and Rio Bravos, they continue to expect 100+ Applebee's franchise restaurants and at least 17 Rio Bravo franchise restaurants giving them a total for next year of at least 25. The timing of the company owned Applebee's next year should be not too different from last year and the past where 60-70% of the openings are in the latter half of the year given the geographic areas they are building and the impact of cold weather. Rio Bravo's openings they would expect to be one in the first quarter, 2 in the second and third quarters, and 3 in the fourth quarter.

MINIMUM WAGE. They reviewed that at some length last quarter. Their expected impact of the increase in minimum wage given the tip credit flow through and the impact in certain states that do not honor the Federal tip credit and Federal minimum wage, they expect the impact to be relatively modest, less than 1% on the top line. It would require sales increases of somewhere between 50 and 100 basis points to offset the cost. In that regard, they have begun some price increases in the fourth quarter and throughout this fourth quarter price increases in selected markets on selected items will fall into place which they believe will at least cover the impact of minimum wage. At year end they will give a little better expectation of the impact.

ADVERTISING FOR NEXT YEAR. They would expect the timing of their advertising to reflect what it has this year and they would expect their level of advertising spending to total about 4% to remain pretty consistent. They also have, as far as promotions next year, they will continue to have their four main food specific promotions plus a gift certificate in addition to two smaller filler promotions which will be made available to franchisees as well as the company the goal being to be on theair and in the restaurant with more weeks and expanded advertising and promotional periods.

* A Fool conference call synopsis represents an effort to highlight the salient points of a conference call and should not be taken as an authoritative accounting or transcription of the entire event. Note: Statements made by a company other than historical information may constitute forward-looking statements for which the company can claim protection under the Safe Harbor Act. Please consult the company's filings with the SEC for information on risk factors which might cause actual results to differ materially from the information contained in these forward-looking statements.