Amid proxy fight, investors still love Applebee’s IRO

By Dominic Jones

BEHOLD Carol DiRaimo, vice president of investor relations for restaurant chain Applebee’s International, Inc.

If I’m reading her National Investor Relations Institute board member bio right, that makes it four times in a row she’s been crowned the best investor relations officer in the mid- and small-cap category in the IR Magazine US Awards.

Carol DiRaimo

The thing that amazes me is that she gets this award, which is based on input from 2,900 analysts and investors, the very day a former head of the Securities and Exchange Commission (SEC) launches a proxy fight against Applebee’s, charging that its stock is a “study in stagnation.”

Richard Breeden’s Breeden Capital Management LLC is nominating four directors to the company’s 12-seat board. The company had offered Breeden two seats during negotiations, but that failed to meet the ex-SEC chairman’s requirements.

Applebee’s stock has been depressed and management is under pressure to cut costs. The firm recently announced it would close 24 underperforming restaurants, but Breeden wants the company to sell all 500-odd owned restaurants to franchisees.

Applebee’s stock (blue) has trailed the performance of some industry peers over the past two years. Shown are Yum Brands (red), Darden Restaurants, Inc. (green) and McDonald’s Corporation (yellow). Chart: Yahoo! Finance Beta

And according to this report, at its latest quarterly conference call, Applebee’s management did not provide a Q&A session. The press release for 4Q earnings did not include a balance sheet or cash flow statement.

To win a best investor relations award under these circumstances is quite astonishing. DiRaimo has to be the consummate super IRO.

What’s her secret? According to this article about Institutional Investor Magazine’s 2006 US Shareholder Friendly Rankings, which also recognized Applebee’s, it’s because she tells it like it is, good or bad.

“It all starts with the investor relations person, frankly,” says one money manager about Applebee’s International, which voters judge the most shareholder-friendly company in the Restaurants sector. Applebee’s investor relations chief Carol DiRaimo, in particular, stands out for providing shareholders with the complete, unadulterated facts, says this voter. “She doesn’t hold back information, she doesn’t try to spin the truth — she tells things like they are, and she is accessible,” he says.

At Applebee’s, excellence in shareholder relations extends all the way up to (former) CEO Lloyd Hill. Voters appreciate that Hill and other executives at the Overland Park, Kansas- based company leveled with them about Applebee’s poorer-than-expected performance last autumn. After the restaurant chain reported disappointing third-quarter earnings in October, Hill didn’t try to spin the bad news; he acknowledged the shortfall and explained how Applebee’s would try to fix it — chiefly, by introducing new menu items.

“I do know some companies that retreat into their shell when things get difficult or challenging, but Applebee’s tells us what is going on, why and what they plan to do,” says the voter. “Communication like that spells the difference between ‘renting’ a stock for a few months and becoming a long-term investor.”

In the company’s own release the day after making it four-in-a-row at the 2007 IR Magazine US Awards in New York, there is more insight into why investors are raving about DiRaimo. The release includes these comments from investors interviewed during the awards survey:

“Applebee’s International is in tune with what shareholders are looking for and asking about,” wrote one analyst on the survey ballot.

DiRaimo is “all over the industry and is accessible 24/7,” wrote another.

I wonder what that says about Breeden’s chances of securing enough support for his director candidates. His firm currently owns 5.42 percent of the company’s stock, making it the company’s fourth-largest investor. But by the looks of the comments about the company provided by the awards organizers, it’s not clear how many investors have lost patience with Applebee’s.

I had to smile, though, reading the following line in a news agency story on Breeden filing his proxy challenge on the day of the IR awards gala:

“An Applebee’s spokeswoman didn’t immediately return a phone call seeking comment.”

Super IRO: Carol DiRaimo is a four-time winner

Assuming they were trying to contact DiRaimo, that’s because she was getting into her evening best to collect a chunk of glass in the shape of an I and an R.

It will be interesting to see the final results of the Applebee’s proxy battle. A good showing by Breeden will cast doubt on the relevance of these types of awards programs or the value of good investor relations practices. A poor showing by Breeden will be a ringing endorsement for the company’s open communication approach and shareholder schmoozing.

If shareholders support the company, perhaps DiRaimo’s CEO will treat her to a trip to Tiffany’s to pick out some extra nice gift, like she did last year after winning her third IR Magazine Award. She’d most certainly deserve it.

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