Thomas Lott
Long/short equity, deep value, special situations, hedge fund manager

Conversion To Franchise Model At DineEquity Makes For An Attractive Dividend Stock

DineEquity (NYSE:DIN) reported fourth quarter figures this week as well as a new capital allocation strategy. Essentially management plans to put all of the company's future Free Cash Flow into the hands of shareholders. DineEquity, franchisor of over 1,800 Applebee's restaurants and over 1,500 IHOP restaurants, is one of the largest full service franchise restaurant operators in the world. Since the acquisition of Applebee's in 2007, the company has been selling off owned Applebee's restaurants, converting to a pure franchisor of their restaurants (99% as of end of December).

As I will explain, the franchisor model is far more attractive than owning/operating restaurants. Margins are higher, operating leverage non-existent, fees quite stable, and capital expenditure needs are extremely...

Join Seeking Alpha PRO to read this archived article and 11,574 other archived articles
IDEA GENERATORXExclusive access to 10 PRO ideas every day
INVESTING IDEAS LIBRARYXExclusive access to PRO library of more than 15,000 ideas
SECTOR EXPERT NETWORKXExclusive access to all sector experts for direct consultation
PERFORMANCE TRACKINGXTrack performance of all PRO stock ideas
PROFESSIONAL TOOLSXProfessional Idea Filters to zero-in based on industry, market cap and more
"In just the first month of using PRO, I used it to generate two ideas which were actionable for me. As a result of these two positions, I have earned more than 20 times the annual subscription costs for PRO."Michael Yagemann, Greenbridge Capital
"I am pleasantly surprised with the scope of small and mid-cap coverage PRO offers. You can't find that any where else."Patrick Rice, Mainstay Capital Management
You may cancel at any time for any reason, and receive a prompt refund for membership on months paid and not used (max. 6 months). Details