Applebee's legal battle with its Ohio franchisee escalates

DAYTON, Ohio -- The legal battle between Applebee's Neighbor Grill & Bar's corporate parent, Dine Brands Global, and its own franchisee, RMH Franchise Holdings, for control over all Applebee's restaurants in Ohio is escalating in U.S. Bankruptcy court in Delaware.

A high-stakes lawsuit related to a reorganization bankruptcy filing remains unresolved in that court. RMH Franchise Holdings -- the Atlanta-based restaurant franchise company that operates nearly 150 Applebee's locations in 15 states, including Ohio -- filed for Chapter 11 re-organization bankruptcy in May.

RMH Franchise Holdings will continue operating, and its restaurants will remain open, while it seeks relief from its debts. Those debts included $14.2 million owed to Applebee's International Inc. for royalty fees and advertising costs, according to bankruptcy court records.

Applebee's corporate parent, Dine Brands Global, challenged portions of its franchisee's bankruptcy filing in its own lawsuit filed three weeks after the initial bankruptcy court action. Applebee's/Dine Brands Global claimed that the Applebee's restaurants operated by RMH Franchise Holdings should not be regarded as assets under RMH's Chapter 11 bankruptcy filing because RMH had reneged on its franchise agreement.

Dine Brands has asked a judge for a court order ruling that all of of the restaurants operated by RMH now essentially belong to Applebee's corporate parent, Dine Brands, rather than its franchisee.

Attorneys for a committee of unsecured creditors of RMH Franchise claimed in court documents filed this month that Applebee's parent company Dine Equity did not provide "clear and unambiguous" notice that it was terminating the franchise agreement, as the agreement itself requires. The attorneys say the termination of franchise agreements "would have a devastating effect" on RMH's restaurants and properties.

"Termination of the Franchise Agreements, at a minimum, would cause great uncertainty for (RMH's) almost 9,000 employees and numerous landlords and vendors that support" the 146 restaurants operated by the franchisee, attorneys said in urging a bankruptcy court judge to consider that impact before deciding on a motion for summary judgment that would resolve the case quickly.

Dine Equity's attorneys say in court filings that RMH admits it stopped paying royalties and advertising fees and that Dine Equity had the right to terminate the franchise agreements "immediately upon providing written notice."

"Rather than challenge these actual facts," Dine Equity attorneys said, those representing RMH "veer off into improper legal conclusions or unsupported and immaterial factual claims. ... The Court need not consider these argumentative statements disguised as facts -- the written documents they reference speak for themselves."

A hearing that will include oral arguments on motions for summary judgment that would end the case quickly is scheduled for Sept. 12 in a federal bankruptcy courtroom in Wilmington, Delaware.

Dine Brands Global says in its lawsuit that if a judge grants its request, it would assume control of the vast majority of RMH's restaurants and continue operating them as Applebee's. But it attached to its lawsuit the list of 20 RMH-operated restaurants it would not seek to take over, meaning those 20 restaurants would "need to immediately de-affiliate from using the Applebee's" name and trademarks if the judge ruled in favor of Dine Brands, according to the lawsuit.

That list included three Ohio restaurants, including one in Kettering.

A spokeswoman for Applebee's Grill & Bar said in June that the restaurant chain's owners want to "keep as many restaurants open as possible" after filing the lawsuit seeking to gain control of the brand's restaurants in the Dayton area and elsewhere in Ohio from its franchisee.

The spokeswoman, however, did not respond directly to a question from the Dayton Daily News about why the corporate owners of Applebee's included in its lawsuit the list of 20 restaurants, including the Kettering restaurant, that it would seek to cut ties with if that lawsuit against the local franchise owner is successful.

"As part of our business strategy, we make decisions about restaurant closures based on various business factors to determine where we can execute our brand vision to its fullest," the Applebee's spokeswoman wrote in an email. "In this case, our hope is to keep as many restaurants open as possible."

Dine Brands Global claims in its lawsuit that RMH Franchise owes it a total of nearly $23.4 million in royalties and fees, and in future royalties and fees lost after RMH Franchise shut down some of the stores it operated. Those closures included a RMH-operated restaurant in Sugarcreek Twp., which shut down June 9.

Other RMH-operated Applebee's restaurants are located in Huber Heights, Xenia, Springboro, Springfield, Sidney, Mason and on Ohio 741 near the Dayton Mall.

Story Filed By Cox Newspapers

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