Dive Brief:

• Apple Sun, a Sun Holdings affiliate, has acquired RMH Franchise Holdings, the second-largest Applebee's franchisee in the U.S. with 131 restaurants across 14 states. This acquisition adds to Sun Holdings' portfolio of over 1,000 locations across 12 states.
• Sun Holdings President and CEO Guillermo Perales said in a press release emailed to Restaurant Dive that the acquisition was in keeping with Sun Holdings' disciplined approach to expansion, and allows the company to break into full-service, casual dining.
• The acquisition comes a little over a year after Sun Holdings acquired 41 IHOP locations from CFRA Holdings, which filed for Chapter 11 bankruptcy protection in May 2020. IHOP and Applebee's are both part of parent company Dine Brands.

Dive Insight:

Despite the acquisition of IHOP units, Sun Holdings' portfolio is heavy on quick-service brands, including Arby's, Burger King, Popeyes, McAlister's and Papa John's franchises. The addition of Applebee's suggests the company has confidence in the recovery of casual dining, and is bullish on Applebee's performance within that segment.

Applebee's did well during Dine Brands' most recent quarter. During its earnings call on Nov. 4, Dine Brands CEO John Peyton noted that both Applebee's and IHOP outperformed their casual dining peers and that their average weekly unit sales exceeded pre-pandemic levels. Applebee's reported a 12.5% increase for comp sales, marking its best quarterly comp sales performance since the chain became part of Dine Brands in 2007.

"We're particularly thrilled that Sun Holdings, the third-largest owner of restaurants in the U.S., join the Applebee's family via acquisition … another signal of Applebee's strong performance," Peyton said during the call.

This diversification of Sun Holdings' portfolio could allows its franchisee to grow without cannibalizing competitive entities. It also allows Sun to cater to shifting consumer preferences, which could be beneficial as consumers become more comfortable dining out. Sun Holdings may also find Applebee's focus on diversifying its own business through off-premise growth and virtual brands, such as Cosmic Wings, appealing.

Sun Holdings has grown throughout the pandemic, including via its acquisition of IHOP restaurants and a recent 100-unit deal with Papa John's to expand throughout Texas. But it's not the only franchisee getting bigger. In July, Jack in the Box franchisee YTC Enterprises bought Taco Cabana for $85 million. Meanwhile, ABP Corporation sold Au Bon Pain to Yum Brands' franchisee Ampex Brands in June. Such consolidation provides economies of scale, efficiencies and shared resource benefits — all of which have become more important to the industry after a year and a half of economic crisis.