Applebee's International said on Wednesday that it will close 24 underperforming company-owned restaurants as the chain continues a strategic review of its business.
Applebee's , which has been under pressure from hedge-fund investor Breeden Capital to cut capital spending and sell more restaurants to franchisees, said the restaurants were not meeting acceptable levels of return on investment and other operating metrics.
"These restaurant closures will have a positive impact on our future earnings, cash flow and return on invested capital," Dave Goebel, president and chief executive officer, said in a statement.
The company, which has 528 company-owned restaurants, has been hurt by a pullback in consumer spending as competition increases with other casual-dining chains.
Last week, it said a preliminary review of strategic alternatives would take another six to eight weeks to complete.
Applebee's said it will transfer about 8% of the managers affected by the closures to other restaurants, and it expects to close about 19 restaurants by the end of its first fiscal quarter.
It also expects pretax charges for the first quarter to include roughly $13.5 million to $15.5 million in non-cash impairment charges for all 24 restaurants; about $8 million to $10 million in lease contract termination costs; and approximately $500,000 to $1 million in other costs.
The company currently expects that lease contract termination costs for the remaining five restaurants will be approximately $1.5 million to $2.5 million.
Of the 24 restaurant that are being closed, Applebee's said 10 are located in two states in New England, while the remaining 14 are scattered across nine other states.
The company said that in the past, it has closed an average of one or two company-owned restaurants per year.