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High Gas prices and a week real estate market have created an ideal situation for IHOP to buy Applebee's for $2.1 billion. IHOP is being led by Julia Stewart, who came from Applebee's originally back in 2001. She is credited with turning IHOP around and through the merger will now be charged with turning her former employer around.
The combined chain of restaraunts will be capable of earning $6.8 billion in revenue per year. The real question will be how consumers will react as they continue to feel the pinch of inflation, energy prices on the rise, a week real estate market and a Federal deficit approaching $10 trillion weighing in on the American economy.
The interesting thing about this story is probably the CEO, Julia Stewart. She came out of operations and has steadily improved the operations of IHOP. Its this ability to change the fundamentals of a company and add value that is significant (as opposed to the all too typical slash and sell off model used by companies in other industries - Motorola comes to mind). A company that is led by a leader that knows how to fix things is going to be far stronger in a bad economy than a company that only knows how to take chargers and sell off their company one fire sale at a time per quarter.
With this approach in mind, executives from Applebee's might be hanging up their Callaway golf clubs on the wall at Applebee's to add to the ambience. They will probably find themselves skipping some business at the club and rolling up their sleeves to get back to basics in their restaraunts.