APPLEBEE'S NEIGHBORHOOD GRILL & Bar restaurants will soon start undergoing a major facelift with upgraded exteriors, warmer color tones and, possibly, fewer tchotchkes.

Applebee's is testing several variations of the remodel, and plans to settle on one in the coming months, said Rebecca Johnson, senior vice president of marketing.
The initiative is the latest step, after upgrading food, marketing and operations, in revitalizing Applebee's since IHOP bought the bar-and-grill chain in 2007 for $2.1 billion, creating DineEquity Inc.

Applebee's, which recently opened its 2,000th restaurant, hasn't finalized a per-store cost. Past remodels, required every six years under Applebee's franchise agreements, have cost at least $200,000 per store, and restaurant chains generally try to stay close to previous figures to avoid discontent.

Franchisees will bear the costs for their stores, while Applebee's plans to upgrade company-owned stores in the Kansas City market.

The cost could run higher at some restaurants if franchisees splurge. Some Applebee's operators have spent more than $300,000 upgrading stores in early versions of the reimaging campaign, two people familiar with the matter said.

A focus of the coming remodel will be upgrading exteriors to show potential customers that the brand is undergoing an upgrade. "That's a driver of getting them back into the restaurant," Ms. Johnson said. The Applebee's red apple logo and other distinctive features will remain.

The interiors, while getting refreshed with new paint and carpeting, may see the walls, traditionally cluttered with framed photos of local scenes, incorporate wall paintings or other artwork evoking the neighborhood.

"The objective is to get more current and bring in aspects of the neighborhood," Ms. Johnson said.

DineEquity had expected to remodel Applebee's since buying the chain. Last year, IHOP completed remodeling its more than 1,400 restaurants, capping off a multiyear turnaround of the pancake house that in turn improved sales.

DineEquity is looking to replicate the same success with Applebee's, following a similar blueprint.

Applebee's remodel launches with still-fragile credit markets and major restaurant lenders reluctant to make loans, said Dennis Monroe, a franchise attorney at Krass Monroe PA. Speaking generally about restaurants, Mr. Monroe said remodels can be a tough sell to franchisees when sales are weak, although sales are beginning to stabilize.

A silver lining is that now costs for materials and labor have fallen.

"It's a good time if you can prove a return and you can get the financing," said Mr. Monroe, who has represented some Applebee's franchisees in the past.

Applebee's franchisees are mostly large entities, with the 1,500 U.S. franchise restaurants run by 47 operators, so they could have easier access to credit. Some franchisees have funded upgrades with their cash flow, having planned for the expense. Applebee's new purchasing co-operative could also help keep costs down for bulk purchases of paint, carpet and other items.

An additional 100 franchise-operated stores are located overseas and will undergo a similar remodel.

The remodels could complicate DineEquity's plans to sell most of the nearly 400 remaining company-owned stores to franchisees to pay down debt from the 2007 acquisition. "If they're overdue on an expensive remodel project, that may affect the purchase price of the stores," said Morgan Keegan analyst Destin Tompkins.

Mr. Monroe said that in such circumstances, sellers typically subtract required capital improvements from the final sales price.