Can Julia Stewart Save Applebee's?

IHOP CEO Plans to Revitalize the Company That Once Passed Her Over


KANSAS CITY, Mo., April 2, 2008—

At the Applebee's test kitchen in Kansas City, Mo., nine full-time chefs collaborate to create that certain "menu magic" that entices millions of diners every year.

The ultimate test is the customer, but Applebee's new CEO, Julia Stewart, has to put her stamp of approval on anything that goes out the door and onto the server's tray in preparation for a new menu that will be launched soon.

Earlier this year she got the chance to, in her words, "make the minnow swallow the whale" when IHOP bought Applebee's, the largest casual-dining brand in the world, for $2.1 billion.

"Applebee's needs really fit our core competencies: reenergizing a brand, improving operations," Stewart said. "We had the management capacity and the wherewithal to really make it happen and so we intend to make the same magic at Applebee's that we've been able to do at IHOP."

In an economy that has been particularly unkind to the restaurant industry, chain restaurants could really use some magic. While not suffering like some of its competitors, Applebee's sales fell 2.9 percent in the fourth quarter of 2007. The company is clearly ripe for a makeover.

Back in the test kitchen, one of the chefs offered her some ribs. After a taste she said she would "be very interested to see what our guest says about that. It has a richness to it. That flavor profile has a richness. Nice job. We'll see, when does this go into test?"

But before the ribs came the pancakes.

From Waitress to CEO

"We called it a waitress back then," Stewart said. "Not a food server. And I wore the hat and the apron and the, you know, the cuffs, and I got hooked. I fell in love with the restaurant business. I love the constant feedback. I love the interaction with the guests. I love the ability to make a difference in someone's life in 35 minutes or 40 minutes — from the day I went in the restaurant and put on the uniform and felt proud to be a part of IHOP."

Stewart was a 16-year-old waitress who worked her way up and became the chief executive of the company where she once poured the coffee and delivered the flapjacks.

"I'm the luckiest woman in the world, right? I'm living the American Dream. You know, food server made good," Stewart said.

This 52-year-old mother of two is now a powerhouse in the restaurant industry. When she arrived at IHOP in December 2001, she decided to shake things up.

"I really believe in reenergizing a brand," Stewart said. "It had been in the franchise business, but we had a large company operations presence and I said, 'Let's sell or re-franchise those company operations. Let's really be in the franchise business.'"

To Stewart, IHOP was spending too much time buying real estate and building restaurants. In fact, some had said that IHOP had become a lender who made pancakes. Under her leadership, IHOP franchisees are now responsible for getting their own restaurants up and running.

Nowadays, she plans to focus more on the pancakes. The results show that her efforts have paid off. IHOP rolled out a new slogan "come hungry, leave happy," and stock value rose 62 percent in a year.

"Oh, I always want to make it better — always raising the bar," Stewart said. "You always want to exceed guest expectations: What can I do to make it better? I think it will always be that way."

Passed Over, Only to Rise Again

When Stewart was growing up in San Diego, Calif., her parents wanted her to follow in their footsteps and become a teacher — they were initially skeptical about her decision to go into the restaurant business. But after graduating from college, Stewart insisted that it was her passion.

Because of her passion she opted to skip the M.B.A. everyone else was getting and go for on-the-job training. After working her way up in restaurant marketing, she started on the management track, and began working at Taco Bell as an assistant manager on the night shift.

"I wasn't the best taco maker in the world but sales continued to increase at every restaurant I worked at and so I was fortunate and worked for a great company and a great brand and continued to grow in my career and eventually, you know, had the entire franchise set of business reporting to me," she said.

Next stop was president of Applebee's, but she wanted to be CEO. So when she was passed over for that job, she left for the top spot at IHOP, then turned around and ate her former company.

But she's not gloating, just focusing on the hard work ahead as she and her chefs search for the magic recipe that will reverse the effects of a bad economy.

She's very hands-on: preferring voicemail to e-mail, returning phone calls within 24 hours, and interviewing job applicants over a meal.

"I would never hire anyone in an executive position that I didn't have a meal with because I really feel strongly about how people treat each other is very much a big part of who and what we are and it doesn't really matter what the position is. I want to see your ability to interact with the food server."

She looks for eye contact, and whether her meal companion thanks the food server.

She wants to know, "did you recognize he or she and what they brought to the experience and thank them, interact with them, ask them questions — how long they've worked here. You can tell a lot about somebody. If you're going to be in our business, you have to have that spirit of customer focus. It's all about the guest. That's our mantra. That's our culture. You wouldn't be successful with us unless you were able to really interact with a food server."

It may have something to do with her being a woman in a man's business, but more likely it's because she has worn that uniform, and she's been on the other side of the table.

"I'm not certain there are specific gender traits. I only know for me my style works," she said.

Did that 16-year-old who worked at IHOP have plans to be the CEO of a corporation at some point?

"Absolutely. Absolutely," Stewart said. "Maybe I didn't know at the time it was IHOP. But in my heart I always wanted to run something — always felt that."