IHOP hearts Applebee's
Eat up, IHOP (NYSE:IHP). You need to expand your stomach. The breakfast specialist is making a big splash in the lunch and dinner space with its $2.1 billion acquisition of Applebee's (NASDAQ:APPB).

IHOP's all-cash buyout of the struggling casual dining chain -- at $25.50 per share -- isn't entirely surprising. Bloomberg reported that IHOP emerged as a participant in the second round of bidding for Applebee's last month.

It seemed incredulous at the time. Sure, IHOP CEO Julia Stewart worked at Applebee's before taking the helm at the pancake-flipping giant, but Applebee's market cap is twice that of its new owner.

There's also an un-IHOP-like streak of negative comps at Applebee's. IHOP may have strung together 17 consecutive quarters of year-over-year improvement at the store level, but Applebee's has stayed in the not-so-delicious red for five straight periods now.



Q2 2006


Q3 2006


Q4 2006


Q1 2007


Q2 2007


Maybe this is the challenge that IHOP needs, and the salvation that Applebee's covets. Applebee's hopes to bankroll part of the transaction by selling its more than 500 company-owned locations to franchisees. That falls more into line with the IHOP model, which is 99% franchise-operated.

Just as long as Applebee's doesn't start dipping its sizzling steaks in IHOP maple syrup, the two unlikely partners may get along just fine after all.

Smells like earnings-season spirit
These are the days that find financial journalists loading up on Red Bull and kissing their pillows goodbye. Earnings season comes every quarter, calling for a forecast of raining bellwethers. This past week was no different.

Quarterly report highlights included:

  • eBay (NASDAQ:EBAY) beating analyst estimates, but spooking Wall Street with a dip in auction listings.
  • Google (NASDAQ:GOOG) missing Wall Street's profit targets for only the second time in its three-year history as a public company.
  • Yahoo! (NASDAQ:YHOO) admitting, in co-founder Jerry Yang's first conference call at the helm, that it had a lot of work to do to pick up its sluggish stateside business and build out its network of third-party affiliates. 

I'd keep going, but then I'd have to buy you a Red Bull.

Until next week, I remain,

Rick Munarriz

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Longtime Fool contributor Rick Munarriz recommends windshield wiper fluid when trying to look back. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. He does not own shares in any of the companies in this story. The Fool has a disclosure policy.