Page 10 - 2018 Apple Annual Report

PROCUREMENT

APPLEBEE'S MARKET BASKET
Applebee’s 2018 full year Market Basket ended up (unfavorable) 1.2% versus full year 2017. This was the first
year in the last three years that ingredient costs were up for Applebee’s. This unfavorability was driven primarily by
higher Poultry and Grocery (French Fry) costs. Pork and Dairy costs were favorable to prior year and provided some
offset to these increases.

This chart below shows the Applebee’s 2018 Market Basket costs versus 2017 by product category.

$ Change 2018 vs % Change 2018 vs
Category 2018 Spend/Store 2017 Spend/Store
2017 Fav/(Unfav) 2017 Fav/(Unfav)
Poultry $95,635 $90,892 ($4,743) -5.2%
Beef $73,998 $74,407 $408 0.5%
Grocery $59,086 $56,685 ($2,401) -4.2%
Dairy $38,365 $39,211 $846 2.2%
Dressings, Sauces
& Soups $37,201 $36,615 ($586) -1.6%

Seafood $24,800 $25,357 $557 2.2%
Produce $24,008 $23,450 ($557) -2.4%
Bakery $22,046 $22,327 $281 1.3%
Pork $22,032 $23,885 $1,853 7.8%
Paper & Packaging $9,952 $9,751 ($201) -2.1%

Oils $6,016 $5,821 ($195) -3.3%
Chemicals $2,315 $2,280 ($35) -1.5%
Grand Total $415,455 $410,681 ($4,774) -1.2%

It is important to note that this Market Basket shows only changes in price on an item based on a static volume.
Where we cannot make a clean comparison, we have “neutralized” year-over-year (YOY) impacts. The benefit
received to operators in moving to Pre-cut Top Sirloin Steaks, and the move from finished IQF Cavatappi to raw
Penne and Fettuccini, have been neutralized in the Market Basket but drove nearly $5,000 annualized savings to
each Applebee’s restaurant, essentially negating the increase reported in the numbers above.

LONG TERM RESULTS Year Budget Actual +/- M-PPI
Since the inception of the Co-op in 2009, Applebee’s 2010 1.6% -1.3% 2.9% 5.1%
cost of ingredients, as measured by the Market Basket 2011 1.5% 3.7% -2.2% 7.8%
(top 70 items), has increased by an average of 1.1% 2012 5.0% 4.5% 0.5% 4.1%
per year. And over the past four years, since 2015, 2013 3.2% 2.4% 0.8% 5.2%
Applebee’s cost of ingredients has decreased by an 2014 1.0% 4.1% -3.1% 6.7%
average of .8% per year. This outperforms any inflation 2015 2.9% 1.9% 1.0% -2.0%
measure available and has minimized or removed food 2016 1.6% -4.0% 5.6% -1.5%
cost inflation as a threat to operator profitability. 2017 -0.6% -2.3% 1.7% -0.2%
2018 1.1% 1.2% -0.1% -1.7%
9 yr avg 1.9% 1.1% 0.8% 2.6%

10