Applebee's owner beats estimates as franchising halves costs

Reuters

* 3rd-qtr adjusted earnings/shr $1.10 vs est $0.92

* Revenue falls 25 pct

* Shares rise as much as 12 pct

Oct 29 (Reuters) - DineEquity Inc said its costsnearly halved in the third quarter after it sold more of itsApplebee's and IHOP restaurants to franchisees, following amodel that has helped U.S. restaurant chains through an economicdownturn.

DineEquity's shares rose as much as 12 percent on Tuesdayafter the company reported a better-than-expected adjustedquarterly profit.

Companies such as DineEquity and Burger King Worldwide Inc, which on Monday reported a better-than-expectedquarterly profit, are moving to a mostly franchise model thatprovides a steady and lower-risk stream of revenue.

Franchisees pay royalties based on overall sales, and alsotake on operating costs ranging from worker pay and food to rentand supplies, such as straws and paper wrappers.

A 43 percent decline in expenses helped DineEquity to post athird-quarter profit that topped Wall Street estimates, even asrevenue fell 25 percent.

More than 94 percent of Glendale, California-basedDineEquity's 3,600 restaurants were owned by franchisees at theend of the third quarter to Sept. 30, up from 91 percent a yearearlier.

DineEquity forecast full-year adjusted profit of $4.14 to$4.24 per share, above analysts' average estimate of $4.00 pershare, saying it expected higher comparable-store sales in thecurrent quarter than it had previously forecast.

The company's U.S. same-restaurant sales rose 3.6 percent atIHOP outlets, but fell 0.4 percent at Applebee's restaurants inthe third quarter.

Analysts polled by Consensus Metrix had expected a rise of 1percent at IHOP outlets and an increase of 0.4 percent atApplebee's restaurants.

Excluding items, DineEquity earned $1.10 per share, beatingthe average analyst estimate of 92 cents, according to ThomsonReuters I/B/E/S.

Net income fell to $18.7 million, or 97 cents per share,from $60.6 million, or $3.14 per share, a year earlier.

DineEquity's shares, which had risen about 25 percent in theyear to Monday's close, were up 12 percent at $80.02 in latemorning trade on the New York Stock Exchange.

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