Full Circle: IHOP CEO Julia Stewart

IHOP CEO Julia Stewart's rapid rise through the ranks has prepared her to take on Applebee's.

By David Farkas, Senior Editor -- Chain Leader, 11/1/2007

Had Zane Tankel been able to attend an Applebee’s franchisee meeting in Naples, Fla., in October, instead of traveling to Argentina on business, he was going to ask IHOP CEO Julia A. Stewart if she planned on launching a new marketing campaign at the struggling bar-and-grill chain.

Glendale, Calif.-based IHOP announced in June it would acquire Applebee’s International for $2.1 billion subject to shareholder approval.

Nevermind that Applebee’s officials were boasting that their new advertising agency, McCann Erickson, was primed to launch a campaign that was "iconic, ownable, extendable and breakthrough."

It didn’t seem to matter to Tankel, who operates 26 Applebee’s in New York’s five boroughs. "When [Stewart] was running Applebee’s, she took us straight from print to broadcast, and it made a world of difference," he says, referring to Stewart’s four-year stint in the late ’90s at the Overland, Kan.-based chain. "She has always been a brilliant marketer."

Such high praise typically attaches itself to Stewart’s efforts, most recently in the case of the once-beleaguered IHOP itself. The 52-year-old executive arrived at IHOP in December 2001, a year after she departed Applebee’s. Since then, she has led a dramatic turnaround that has changed the franchise model, updated the menu and boosted morale among franchisees.

"Without question she has reinvigorated franchisees," declares Natchez, Miss.-based franchisee David Paradise, who operates 12 IHOPs and 11 Applebee’s. "She is very strong on visualizing where we need to go and then aggressively getting us there."

Star Quality

Winner of this year’s Chain Leadership award, one of three Execution Awards Chain Leader presented in October, Stewart seems keenly aware of her strengths. Asked who might play her if a movie were made of her life, Stewart answers Renee Russo. "She’s a strong, smart, sassy leading lady and she’s genuine," she says of the 53-year-old actress and former model.

The adjectives fit Stewart like a glove, acknowledge friends and former associates, and they help explain her string of successful ventures in the restaurant business after graduating from San Diego State University in 1977.

Leisure and entertainment consultant Roberta Perry, who has known Stewart since the 1980s when the two regularly attended Marketing Executive Group meetings, says Stewart "has always taken care of people and never walked over anyone" on her climb up the corporate ladder. "I’ve always admired her for that," she declares.

Stewart came to national attention in the mid-’80s after spiking the sales needle at then-moribund Stuart Anderson’s Black Angus, a chain of midpriced steakhouses. Her modus operandi: a return-to-basics strategy that featured an endearing spokesman and focused on beef.

"We had gotten away from what made us famous," Stewart recalls, adding she got plenty of leeway from Charlie Lynch, CEO of parent company Saga. "He told me, ‘Go do what needs to be done.’"

Her efforts paid off. By the time she left the steakhouse chain to join Taco Bell in 1991, she was overseeing marketing, purchasing and development.

"Julia was an excellent leader, and she always enjoyed her staff and exposed us to the expertise of others," says culinary consultant and close friend Karen Gorrell, who reported to Stewart at Stuart Anderson’s.

"I made friends for a lifetime there," Stewart says, recalling the condo she rented for a three-day planning session where everyone took turns preparing meals. "It was so much fun and such great magic. How many times in your career do you have that magic?"

Rising to the Top

Many, it appears. Stewart, for instance, sped through PepsiCo’s prestigious Advanced Management Recruits program after joining Taco Bell, though she spent her first six months in store operations.

That’s where Bill Floyd, then the chain’s vice president for operations and Stewart’s immediate supervisor, spotted her leadership skills. "We used to say that an important determinant of success [in the program] was whether the crew adopted these people and saw them as someone who connected with them and empathized," he explains. "Julia fit that to a T."

After that, Stewart says, "I kept getting promoted."

By the end of her tenure at Taco Bell, she was vice president of operations for the chain’s Western region, which comprised more than 1,000 units. "Franchisees looked to her as a leader," Floyd says.

Karen Eadon, senior vice president of marketing at Applebee’s during Stewart’s tenure there as president, remembers her boss as a "strong leader" who often invited opinions before making strategic decisions. "Julia was very open to divergent points of view and to vigorous discussion that would allow her to see all sides," says Eadon, now chief marketing officer for El Pollo Loco.

Eadon adds that Stewart wanted to improve the entire Applebee’s system and focused her efforts on improving food quality and marketing, which went from tactical to strategic. A new tagline—"Eating Good in the Neighborhood"—neatly captured the brand’s essence.

"Julia moved the [sales] needle," Tankel remembers. Systemwide same-store sales were rising at the end of Stewart’s tenure, from 1.7 percent in 2000 to 3.2 percent in ’02.

"Applebee’s was such a compelling story," recalls investment banker Allan Hickok, then a restaurant analyst at Piper Jaffray.

Eadon and others say Stewart is always quick to show colleagues her appreciation for their work. "Let’s say someone had pulled together a presentation; the next day there’d be a thank-you note from her or flowers on the desk," Eadon remembers. "To me, she is a role model in how she shows appreciation for even the smallest things."

Next Up: CEO

Stewart, meanwhile, was anxious for one big thing to happen: being appointed Applebee’s CEO, which she believed had been promised to her when she joined the company in 1996. She was given "a couple years" to demonstrate her capabilities.

"I went into [CEO Lloyd Hill’s] office one day and said, ‘It’s been three years. It’s time,’" she remembers. "He said, ‘Nah, I don’t think so.’ And I said, ‘Then it was probably best to leave.’"

Hill did not return calls seeking comment.

Stewart landed the president’s job at IHOP Corp. in 2001 and was promoted to CEO shortly thereafter. Her boldest move was changing the franchise model, which allowed franchisees to use their own equity to open an IHOP restaurant. "The franchisee today develops their own units. They have a greater investment in it. They have greater opportunity to make more money," offers Bob Leonard, a veteran franchisee and chairman of IHOP’s advisory board.

Fast forward to present. At press time, Stewart won’t discuss the impending transaction, likely because several large Applebee’s shareholders have said they will vote against the merger on Oct. 30.

Meanwhile, "we are moving ahead as we should be," Stewart declares.

It pleases Tankel: "I’m not sure I would be that happy [with the merger] if it weren’t Julia Stewart in charge. I am really happy about Julia."

S. Truett Cathy, Legend Award Winner

Lots of entrepreneurs claim a passion for their business lead to their success. Not S. Truett Cathy, chairman and founder of 1,300-unit Chick-fil-A, which surpassed $2 billion in sales in 2006.

The 86-year-old businessman, who ranks No. 380 on Forbes list of the 400 wealthiest Americans this year and is worth $1.3 billion, advises, "Don’t get overexcited by what you are doing." Reason: You’re likely to borrow yourself into debt.

Cathy, a high-school graduate, learned that lesson early. His family struggled during the Great Depression, making ends meet by taking boarders into their home. Necessity proved to be mother of invention: By the time Cathy—who prepared meals, sold beverages and delivered papers—was in his 20s, he was already in the restaurant business.

Cathy says he keeps a sign in his office that shows a man wearing a suit and tie tethered to the side of a mountain with safety ropes. "The caption reads, ‘With care and confidence, no goal is too high.’ That’s what I remind our people here," he explains. "Let’s not be bombarded with debt and sleepless nights wondering how you’re going to make payments."

Indeed, Cathy, author of four books including two autobiographies, is penning another about how he got rich. Working title: How Did You Do It, Truett?

Clay Dover, Protégé Award Winner

A manual labor job during college convinced Clay Dover that the restaurant business was his future.

"When I put a drill bit through my finger, I realized that maybe a couple of burns weren’t so bad," says the chief concept officer for Metromedia Restaurant Group, who had worked for Bob’s Big Boy while in high school.

Today the 36-year-old California native, who rose through the marketing ranks at Chili’s and Houlihan’s, is creating new restaurant concepts while trying to resurrect "heritage brands" Bennigan’s, Steak & Ale, Ponderosa and Bonanza.

In the case of Bennigan’s, this year Dover introduced Bennigan’s Sport, a casual concept that features large-screen screen TVs, 20 tap beers and a line of pizzas baked in a wood-fired oven. Sustainable sales have climbed about 7 percent at remodeled units, he says.

Dover is also reinvigorating Ponderosa with a remodel in St. Louis. He’s getting ready to launch a strategic plan for Steak & Ale. And MRG’s new fast-casual restaurant, Bennigan’s Quick Grille, a slick looking, 2,600-square-foot restaurant featuring field stone, dark woods and a fireplace, launches in Dallas next year.

"What I enjoy here in my role is that I can affect any part of our business," he declares.

Dover, however, is careful not to let passions run too high. "It’s very easy to get distracted by the shiny new toy," he says. "I still have 299 other [Bennigan’s] paying the bills, and they need to continue to perform."