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With a Turnaround Needed, DineEquity’s CEO Julia Stewart Resigns

Faced with disappointing results of its fourth quarter and full year for 2016, DineEquity Inc. (NYSE:DIN) announced yesterday the resignation of its chairman and chief executive officer Julia Stewart, effective March 1. Richard Dahl, the lead director on the firm's board of directors, will take Stewart's place as interim chief executive officer and chairman.

The board has begun a search for a permanent replacement. Upon completion of the chief executive officer search, the DineEquity board of directors intends to separate the chairman and chief executive officer roles.

Dahl has served on DineEquity's board of directors since February 2004. He has more than 35 years of experience in senior management of public and private companies, including positions of chief executive officer, chief operating officer and chief financial officer. The board has appointed Caroline Nahas as its lead director, replacing Mr. Dahl. Douglas Pasquale will succeed Dahl in his previous role as chairman of the audit and finance committee.

DineEquity is the parent company of IHOP and Applebee's Neighborhood Grill & Bar restaurant brands, two concepts in the troubled casual dining sector that is experiencing a downturn in traffic. The Applebee's restaurants are operated a hundred percent by franchisees, while the IHOP chain is 99 percent franchised. IHOP reported a decline of 2.1 percent in domestic same-restaurant sales for its fourth quarter of 2016 compared to the same period in 2015, while reporting a decline of only 0.1 percent for the entire year.

Applebee's fared much worse. Its domestic same-restaurant sales dropped by 7.2 percent for the fourth quarter, while for 2016 Applebee's restaurants had a drop of 5 percent.

Mark Kalinowski, restaurant analyst for Nomura Securities, commented how results were worse than expected. "Fourth-quarter same-store sales for Applebee's declined by 7.2%, the worst performance for any of the top 25 largest restaurant chains in the U.S., as measured by domestic systemwide sales," emailed the restaurant analyst to investors. IHOP's figures were far from impressive as well. Regarding DineEquity's turnaround prospects, Kalinowski wrote: "The challenges remain large and likely won't be fixed easily or quickly, particularly at Applebee's."

Incoming interim CEO Richard Dahl sounded resolute and determined to hang on to both restaurant brands. "DineEquity will continue to invest in the long-term success and growth of both IHOP and Applebee's. I will be working very closely with the Applebee's franchisees to improve performance," said Dahl. "While a turnaround of Applebee's will not happen immediately, the results of a comprehensive diagnostic conducted by a world class management consulting firm has enhanced our understanding of what has driven our recent sales trends.  More importantly, we have a go forward plan to improve performance, and have worked with the same firm to validate our initiatives and identify additional creative strategies to expeditiously return Applebee's to growth."

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