IHOP CEO Interviewed

IHOP's chairwoman and CEO, Ms. Julia Stewart, speaks with the New York Times about the wisdom of IHOP's acquisition of the giant dining chain, Applebee's. Since joining IHOP from being president of Applebee's, Ms. Stewart has transformed IHOP, after a push to be a pure franchise chain. "More than 99 percent of its 1,319 restaurant system owned and operated by franchisees." She now believes she can transform Applebee's sluggish chain.

Here are a few of the questions that were asked of Ms. Stewart. Notice how she focuses her answers warmly on IHOP's franchisees.

NYT: You surprised a lot of people with your announced plans to buy Applebee’s International for $1.9 billion — in cash — plus the assumption of debt. How did the deal come together?

JS: We announced in January 2006 that we would be looking at strategic alternatives, which included an acquisition. It had to be a concept that did not compete with our base business. So it couldn’t be in the family dining category, because we didn’t want to jeopardize our terrific relationship with our franchisees. It had to be something in either casual or fast food or specialty. Secondarily, it had to be something of significant size. It had to matter. And it had to be something that would really fit with our core competencies. It had to be a strategic fit.

NYT: This is a critical moment in your career — you are basking in the glory of 18 consecutive quarters of growth at IHOP and a strong stock price. What if you bet wrong on Applebee’s?

JS: I don’t see it that way. I see it as we successfully turned IHOP into this fabulous successful brand, as measured by top-line sales and franchisee health and consumers — and we are now doing the same exact thing at Applebee’s, so to me, it’s just more of the same. I don’t see it as a turning point but a repeat.

NYT: Your franchisees have given you a nickname — the Velvet Hammer. What’s that all about?

JS: ...I am tough on standards and raising the bar, but I do it in a caring manner. I think I am a very people person, I’m very supportive. My style is much more collaborative, to do it in a relationship-building way. It is a different set of skills to run a franchise organization. No one reports to me. These are all very successful businessmen and women who have an entrepreneurial spirit, which I really admire and respect, but yet they want the leadership and direction from us as the franchiser. It’s a fine line you walk in providing leadership and direction and strategy and tools, but doing it in a way where it is a push-pull.